British egg producers are not the only ones suffering from the effects of an imbalance in the egg market. But elsewhere in the world there is evidence of a more direct approach to solving the problem of oversupply.
It seems that Taiwan is another country where farmers are producing too many eggs to meet the demands of the market. Just like here in the United Kingdom, Taiwan apparently has too many laying birds and this has resulted in a dramatic fall in producer prices. But whilst here in Britain the industry is looking largely to the market to correct the imbalance over time, in Taiwan the government has stepped in with its own drastic solution.
According to the China Post, the government is paying farmers to pull down chicken sheds and take birds out of
production.
The China Post says that the Taiwanese government has "announced an unprecedented move to spend NT$20 million to ask local chicken farmers to cut the number of chickens being raised by two million for a period of one year in the hope of stabilizing egg prices."
The move has sparked outrage amongst some observers on the blogosphere. One critic wrote, "Seriously...that’s what the government came up with? Destroy buildings and chickens then use taxpayers’ money to subsidize their loss.
This should be shunned like the plague. Let Taiwan’s free market sort it out.
Maybe farmers will come up with higher quality of eggs at a lower price. People tend to become more inventive in harder times."
Another one questioned the morality of destroying egg production when there were shortages of food around the world. "Rather than reduce production (in a time of global food shortages) let’s find ways to make productive uses of food overproduction. Many countries would be envious of this problem. Cabbage and egg prices are low. People should purchase and eat more of them. Same when the prices of oranges, grapefruit and other fruits are low. Taiwan has some delicious produce. Enjoy them... enjoy them more when the prices are low and support our local farmers."
The China Post says the authorities in China have acted on concerns about large falls in the prices of eggs. It says that the Council of Agriculture (COA) has reported that local egg prices have suffered a 34 per cent drop in the past few months from NT$27.5 per 600 grams to NT$18 per 600 grams. It says that the price is the lowest for the past three years.
The China Post reports, "Hsu KueI-sen, chief of the COA’s Animal Husbandry Department, said his department has been warning local chicken producers since late last year of a possible plunge in egg prices. However, many of the chicken farmers failed to heed the COA’s advice and continued the rate at which they raised chicken.
"The standard supply of eggs should be around 88,000 boxes (200 eggs per box) per day. However, Hsu noted that the current daily supply is exceeding 93,000 boxes.
"The reason for the production surplus is mainly farmers raising two million more chickens than needed in the current market, Hsu said.
"To stabilize egg prices resulting from overproduction, Hsu announced that the COA is going to ask growers to stop raising two million chickens.
"In order to do so, chicken farmers should apply to the COA for a temporary cessation in the raising of chickens to hit the proper quota for one year.
"During the one-year-period, farmers should tear down a portion of the chicken coops they own. The council will make regular inspections to verify that they are following the order, he noted.
"The government will subsidize farmers between NT$1 to NT$1.5 per chicken. The total budget that will be using to implement the project should be around NT$20 million, he added."
The approach is a far cry from efforts here to reduce the current oversupply in the egg market, although BFREPA members will no doubt be interested to read about egg producers in other parts of the world experiencing difficulties similar to their own. They will also be intrigued at the way the government had stepped in with a financial scheme to take hens out of production.
Here in the UK the industry is seeking to reduce bird numbers, but without the benefit of financial intervention by government. The packers’ organisation, NEMAL, recently revealed that the cage sector was in the middle of an early depletion programme in an effort to deal with egg numbers. NEMAL representatives have told BFREPA chairman John Retson that the free range sector also needs to reduce bird numbers as soon as possible. Chick placings are falling and will have an impact on bird numbers over time, although this will not have an immediate effect on the market. NEMAL has warned that the problem of oversupply may well continue into next year.
One thing that may have an effect on oversupply is the market itself and the harsh economic realities of egg production. BFREPA costings show that free range producers are losing more than £5 per bird at the moment. For some producers such losses will become unsustainable and they will be driven out of the industry. Whilst this may prove effective in correcting the oversupply in the market, John Retson has been warning supermarkets that driving producers out of the industry may also have a longer term impact on security of supply.
The EU ban on conventional cages comes into effect on January 1 next year. When conventional UK cage units stop production the UK egg market may well find that it needs the eggs from the free range producers who have been forced out of the industry by the current low prices.