November Newsletter
UK Egg Centre
UK Egg Centre Ltd is the leading importer and distributor of egg products to the UK.
GLOBAL MARKETS?
The following report is from www.rabobank.com
High Prices Shaking Up Global Egg Supply Chains Egg prices have reached record-high price levels in many markets. Rabobank’s global egg price monitor reached a new record in Q1 2023, with the index now peaking above 250, which means prices are 2.5 times higher than the reference year of 2007, and have increased more than 100% since this time last year (see Figure 1).
Between Q1 2022 and Q1 2023 prices in the US and EU increased by 155% and 62%, respectively, while egg prices in Japan reached JPY 235 in March, their highest level since 2003. Prices in many other markets have reached historic highs as well, including in Thailand, the Philippines, Israel, New Zealand, Nigeria, Kenya, Brazil, Mexico, and Argentina. These sudden price increases have a big impact on players in the egg supply chain – from breeders to producers and further along to customers in retail, foodservice, and food processing.
Historically, egg prices have roughly followed the FAO Food Price Index. Some periods have seen divergences, such as 2007 to 2013, when the industry struggled to pass on high and volatile feed prices. And in 2013 to 2019, egg prices were slightly higher than index’s movements, as demand for eggs was relatively strong while feed costs normalized.
Egg prices followed the food price index when feed prices rose in 2021 and accelerated in 2022, after Russia invaded Ukraine. Since then, egg prices and the food price index have again diverged: Egg prices have kept rising while food prices have started to drop. Some markets, like China and India, are less bullish (so far), with prices up by only 15% to 20%. In Brazil, potential future avian influenza (AI) outbreaks – given cases reported in nearby Argentina, Uruguay, and Bolivia – could yet impact egg prices heavily, especially if the S?o Paulo region, where there is a high concentration of egg production, is hit.
What is driving these exceptional price increases and what can we expect in the near term?
What Drives Eggflation?
These high global egg prices reflect a combination of six supply and demand factors. The relevance of each factor differs a bit by region, but in most markets currently facing peaking prices, a combination of the following factors is affecting prices.
1. Upward movements in feed costs. Feed represents 60% to 70% of a layer farmer’s costs. Any change – and especially any uncertainty – surrounding feed costs affects egg prices. Global feed prices doubled between mid-2020 and mid-2022. This has had a big impact on the egg industry, as it has been difficult for producers to pass on these higher costs to customers.
2. The impact of avian influenza outbreaks. AI pressure has been very high over the past two years. In the US, more than 40m layers were depopulated during 2022. In Japan, more than 15m layers have been affected, and in Europe the laying hen flock is down by 3% to 5%.
3. The aftermath of Covid-19 market disruptions. Many operations scaled down after Covid19 measures restricted people’s movement, which highly impacted demand.
4. Regulations. The introduction of male chick culling at the hatchery level in Germany in 2012, for example, has had a big impact on the market. According to market data agency MEG, Germany lost 20% of its laying hens due to this restriction. As Germany is Europe’s largest importer of eggs, this affects the wider EU egg market. Similarly, the introduction of a cage ban for producers in New Zealand has led to a 5%-to-12% drop in laying hens in the country.
5. Changing consumer behaviour. Pressure on consumer spending power due to low economic growth and high inflation during the economic downturn has seen consumers trading down and looking for cheaper protein sources, lifting demand for eggs.
6. Tight supply caused by uncertainty. Producers are experiencing a lot of uncertainty. Restocking hens on a farm represents a commitment of more than one year of production. This has become riskier, as many buyers do not want to offer volume and price contracts to offset some of producers’ risks. As a result, the lower number of hens restocked by farmers have led to low supply in many markets.
What’s Next for Eggs?
The egg industry can generally count on the following rule: Price peaks tend to lead to similar price drops one to two years later. This is usually caused by producers’ response to periods of higher margins. They typically increase hen numbers to try to tap into higher prices, thus creating oversupply. We saw this trend in 2009 following Germany’s ban on conventional cages; in 2012 after the introduction of the EU’s conventional cage ban; in 2015 after the US industry’s AI crisis; and in 2017 after the Netherlands’ fipronil crisis.
Can we expect a similar trend this year?
We think prices will go down in countries and regions with extreme price peaks like the US, Europe, and Japan, but likely not to the sorts of lows we have seen following other crises. T
This is due to a few factors that are different today. In general, we expect egg prices to stay relatively high throughout the end of 2023.
However, there will be differences between countries. Prices will remain high in countries with persistent AI pressure, restrictions on grandparent stock or breeding stock imports, financing challenges such as a large number of farms with limited access to finance or the US dollar, and countries undergoing regulatory change (like Germany).
The fast spread of AI in Latin America, for example, has had a big impact, with prices spiking in the countries most affected by outbreaks. Other countries will likely see a move back to historical price and volatility levels following these price peaks. Still, ongoing high input costs will mean prices will not return to the low levels seen before 2021.
There is currently great concern about high prices impacting the affordability of eggs for low-income consumers, especially in emerging markets. For these groups, eggs are an important staple food and source of protein and nutrients like vitamins B6, B12, and D. In these markets, eggs are positioned as the most affordable protein and are easy to distribute, as cold chain transport is not needed. If eggs become more expensive and less available for these consumers, it could pose major social and health risks.
CURRENT EU MARKET SUMMARY
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UK MARKETS
Laying hen flock expansion slows over summer.
The sharp recovery in the UK laying flock took a stumble during the summer, delaying the return to a more balanced egg market.
Day-old pullet placings were down by 210,000 in July compared with a year earlier.
This was the most significant monthly decline for a year and a half.
Chick numbers recovered again in August, with year-on-year growth of 280,000, so the laying flock grew by just 70,000 over the two months.
In the previous six months, from January to June, pullet placings had been up by a cumulative 2.2m compared with the first half of last year, which is a much faster average expansion of 370,000 birds a month.
领英推荐
Latest placings
By the time the latest placings reach point-of-lay in January, the flock is set to be 2.5 million birds greater than at its low point in March this year; but still three million smaller than its typical size in the two years leading up to the invasion of Ukraine.
It’s worth noting that this July-August were the last months to hatch birds that would reach point-of-lay, and then complete a full year in lay, before the supermarkets’ planned removal of colony eggs from their shelves in January 2025, so perhaps a stumble over future stocking intentions could be expected.
There will still be plenty of colony eggs heading for foodservice and manufacturing after the 2025 deadline, but birds placed for supermarket contracts from now on should, in theory, be non-colony.
Summer trade
During the late summer, the UK market came under pressure from surplus ‘vaccine’ flocks and cheap imports, reported the Central Egg Agency (CEA).
Wholesale colony prices softened as a result, and are still down on July levels, by up to 25p/doz for Mediums, for example.
The trade is only now picking up again for the usual end-of-holiday upturn.
“It has been a little bit quiet through July and August, and most of September,” said CEA’s Andy Crossland.
“We are just starting to see a bit of a lift in retails now.”
“Free range has gone quite tight, with a lot of packers looking to buy off the market.”
FEED MARKETS
THIS month,?Poultry Network’s?calculation of a basic layers ration has risen again, by ￡6/tonne compared with last month.
In the event, feed costs have drifted aimlessly through the summer season, with our layers ration moving within a range of less than ￡20/ tonne.
It was down in June, then July up, August down, September up. Both the key ingredients, wheat, and soya, have been bounced around by changing news over factors such as the Black Sea corridor, weather in the US and elsewhere, and the impact of the global downturn, with no clear trend developing.
The current analysis is that the global wheat trade remains tight, but prices will be restrained by continuing keenly priced Black Sea supplies, along with sideways pressure from an expected surplus of maize.?
Soya
Soya is awaiting final news on the drought damage to the current US crop, while looking forward to a heavy South American supply.
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RETAILER ACTIVITY
With the announcement from British retailers some time ago with regards to their commitment to caged free eggs and egg products; things are starting to develop as we head into 2024 but it’s very slow.? What is concerning is how the market will supply, when the demand is unknown.
Lidl have announced they will now move to Barn instead of Free Range.
Tesco are to move to Caged Free from June 2024 across some categories.
News about other retailers is still sparce for both food manufacturers and the egg processing industry as we wait to hear what the actual plans will be.
SUMMARY
In the UK Free Range Eggs remain tight. Source: Poultry Network. 3 Nov 2023
‘The rise in day-old pullet placings, which began last October, heralded a sustained increase in the laying flock starting this March.? Between then and now, the number of birds in their first 52 weeks of lay is estimated to have risen by 2.4m.
However, projecting forward the latest placings to point-of-lay indicates this rise will now tail off, with the UK flock only likely to gain an additional 200,000 or so birds by February’.
Demand for eggs from Europe is increasing to a) secure sustainability of supply and b) to service the demand of caged free eggs for the UK Market.? However, the lack of planning in phasing the transition to the not just UK markets but EU markets will no doubt cause an impact as we had into 2024.
Some British manufacturers have already secured supply with EU barn egg, any more demand however will be on a first come first served basis.?
The forecast going into 2024 is that it will hopefully be a better year on prices however this is all subject to any impact that the industry may see from any Avian Flu outbreaks.
It was predicted by many from within the industry that the recovery from the pandemic of COVID019 through to the outbreak of the Ukrainian War along with the economic crisis, that it would take at least 5 years for the markets to recover.? Looks like this prediction is indeed true.? Whilst 2024 hopes to be a better year than 2023 it is still a long way off to getting back to what was normal.
PRESS RELEASE – EGGA FOODS GROUP - Wednesday 8th November
Hardeman Egg Group, Egga Food Group and Eivo have announced their intention to merge, in order to reinforce their international position in the egg industry. By joining forces to combine knowledge and experience, as well as increase egg and egg product capacity, they can respond even more efficiently to market demand.
The merger is awaiting approval from the Netherlands Authority for Consumers and Markets (ACM).
As well as specialising in the packaging of fresh eggs for retail, Egga Food Group, which is located in Ospel in Limburg, has expertise in boiled, peeled, and dyed egg production. Within an 800km radius, Egga Food Group has established an important position in the European food industry, food service industry and retail markets. The merger will allow current Egga Food Group and Eivo shareholders to take a gradual step back, while the future and continuity of the companies involved is secure. In this context, it is vital that the companies remain in Limburg and that new international opportunities will arise for both organisations and their employees. The Sieben brothers will also remain involved in operations at Eivo.
The acquisition of Egga Food Group and Eivo enables Hardeman Egg Group, which trades under the names Kwetters and Adriaan Goede, to further strengthen its egg supply chain. In addition to its own poultry farms, used for both rearing and production purposes, Kwetters has an extensive network of poultry farmers. The incorporation of Egga Food Group’s network of farmers and business associates will increase the size of the Kwetters network and lead to new links and cross-connections being established. This strategic step is positive news for the future of both companies and all other links in the chain.
At UK Egg Centre we are excited about the intention to merge which strengthens our supply base of raw materials within our supply chain.?
Egga Foods Group will still operate under their current management and the relationships with UK Egg Centre will remain the same and continue as normal, strengthening our raw materials for boiled eggs.
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