Where now for small cage producers?
Many smaller egg producers are likely to be lost to the industry when the EU’s ban on conventional cages comes into force in 2012, according to a report drawn up for Defra by ADAS. There is a fear in the industry that this could lead to a shortage of eggs - particularly if the growth of free range production is less than expected.
The report has been prepared by Jason Gittins of ADAS and follows a series of meetings arranged for cage egg producers about the EU directive on conventional cages, which is due to take effect on January 1 2012. Those meetings took place during September and October and Jason Gittins’ conclusions raise a number of concerns for the egg market.
"Discussions with smaller cage producers at the meetings and with equipment suppliers beforehand suggest that many will not be investing in new equipment for 2012 and this is consistent with other surveys," he says in the report. "In some cases this decision is being taken with considerable regret, particularly amongst businesses that market their own eggs successfully at present. Several said that there was simply no cost effective way of staying in production, whether they opted for use of converted or new buildings."
He said that he could identify only 15 to 20 businesses in England that had already or may shortly invest in significant numbers of colony system places. "It remains to be seen if there will be sufficient investment amongst these businesses to contribute proportionately to the anticipated requirement of 10 million colony system places in the UK by 2012. It should also be noted that if the free range market share does not increase to the levels recently predicted, then the requirement for colony system places may be higher than current forecasts suggest."
He said that one of the feelings to come out of the meetings was that it was overoptimistic to expect free range to take up 50 to 55 per cent of the market and that there would be a greater demand than predicted for colony eggs after 2012. Even if UK requirements for colony system equipment could be met by 2012, it would be impossible to meet the requirements for all EU member states. And even if manufacturers could make the equipment, there would not be enough skilled people to carry out the installations. Unless the time scale for the introduction of the legislation was changed there would be a major shortage of eggs in 2012. These were some of the the concerns raised by members of the industry during the ADAS meetings.
The report said that in 2007 some 60 per cent of laying hens in the UK were still housed in cage systems that would be prohibited under the EU directive. Even though it was more than nine years since the directive was first published, the precise requirements of the legislation had only recently been confirmed, said Jason Gittins. Industry had called for the ban to be delayed beyond 2012 because of the delayed publication of the details of the directive. This view was aired by people who attended the meetings, he said.
A total of 14 meetings were staged at locations throughout England. The stated aims of the meetings were to explain the legislative changes and the different options for egg production after 2012, to clarify the time scales set out in the legislation to ensure that producers understood their obligations, to help existing cage producers make informed business decisions about whether to reinvest in egg production facilities, to provide guidance on the capital costs and production costs of various productions systems and offer guidance on other issues such as planning and environmental considerations.
Just over 150 people attended the meetings, including representatives of large egg production companies and owners of small businesses. Those who attended accounted for between nine million and 10 million laying hens. ADAS contacted a number of producers who did not attend the meetings to discover the reason. "A common reason was that they had already taken the decision to cease production in 2012 and therefore felt that the meeting would not be relevant to them," said the report.
Those who did attend the meetings raised concerns about finance and the costings produced by ADAS. "Given the prevailing economic uncertainties at the time of the meetings, some producers questioned whether banks would be willing to lend money and if so, on what basis," said the report. "It would not be possible for producers to arrange to borrow all the money needed for reinvestment within the next three years. Investment would have to be phased in over a longer period. Some producers thought that they would need to repay loans (particularly for the purchase of equipment) over a 10 year period, rather than over 20 years as was assumed in the costings. If this was the case, production costs over the next 10 years would be considerably higher."
The report said that many delegates indicated that they were unlikely to continue in egg production after 2012. The industry felt that the EU’s aims could not be achieved. "Producers generally concluded that the task of replacing all conventional cage production with colony, barn and free range systems throughout all European Union countries by 2012 was impossible," said the report in its conclusions. "This was partly because of a lack of equipment manufacturing/installation capacity and partly because producers felt that their counterparts in some countries would not be forced into complying with the legislation until well after the 2012 deadline."
Some felt, said the report, that at some point the Commission and Governments would realise that the task of reinvesting and re-equipping could not be completed in time and this would lead to some sort of change, delay or compromise being reached.
