The fifth roundtable meeting in the series on poultry economics and marketing offered the opportunity to compare and contrast the egg industries in the United Kingdom and the United States.

The meeting, organised by Peter van Horne of the LEI department at Wageningen University in the Netherlands and Jason Gittens of ADAS in the UK, was held under the auspices of a working group of the World’s Poultry Science Association (WPSA) in the fine university city of Cambridge.

Egg industries in crisis and their recovery

Both countries have experienced a crisis in their egg sectors. For the US, the thunderbolt came in December 2014 with the first outbreak of highly pathogenic avian influenza (HPAI) in the west, explained Maro Ibarburu-Blanc, an economist in the Egg Industry Center at Iowa University.

Maro Ibarburu-Blanc described the economic impact of this year's avian influenza outbreaks on the US egg sector

By the end of June, there had been 223 outbreaks and more than 48 million poultry had died or been destroyed. Only 14 per cent of the outbreaks were in layer flocks but, because of their large average size, 71 per cent of the birds affected were laying hens, along with almost 5.9 million pullets.

The outbreaks started when the egg industry was riding high on positive consumption, production, price and exports trends and comparatively low costs of production. Then egg output fell, resulting in a decline in egg consumption, higher wholesale prices and more imports.

Economic losses for lost egg production alone are estimated to reach $750 million, as well as 1,800 direct jobs and 4,200 total jobs. Costs to the USDA could run to $550 with $190 in producer indemnity, making this the most expensive animal health crisis in US history.

The future of egg prices is hard to forecast, according to Mr Ibarburu, as it depends on when producers are able to re-stock. The supply of pullets is a major bottleneck in the production cycle, with a minimum 20 months to recover a whole flock.

The building of new pullet houses, moving pullets on earlier, using spent hens or imported pullets or repopulating at lower stocking density are costly options or introduce biosecurity risks and so US egg production looks likely to recover only slowly. With only one company rearing and selling pullets independently, this part of the US market is not open.

For the UK, as Mark Williams of the British Egg Industry Council (BEIC) explained, the crisis came in 1988, when the then health minister, Edwina Currie, said in an interview that “Most of the egg production in this country is affected with salmonella”.

Mark Williams discussed how the UK egg industry recovered from a crisis of lost consumer confidence

This caused egg sales to plummet as consumers lost confidence in the industry and the government was forced to offer very expensive compensation to cover the cost of purchasing surplus eggs and for the slaughter of unwanted hens.

With the formation of the BEIC and the British Lion quality scheme 10 years later to eliminate Salmonella in eggs, the UK industry has emerged from the crisis in a relatively strong position.

Food safety remains the top priority for the egg sector. Around 90 per cent of eggs are produced under the Lion scheme and it covers 1,700 registered sites.

Without the scheme, the country would be only 50 per cent self-sufficient in eggs, according to Mr Williams, rather than the current 90 per cent, and human cases of Salmonella enteritidis (SE) Phage type 4 in England and Wales have fallen significantly.

Avian influenza (AI) is an ever-present threat in the UK, as elsewhere, Mr Williams said. There were three unrelated outbreaks in England in the last year, affecting a duck breeder flock in Yorkshire in November 2014, a broiler breeder flock in Hampshire in February 2015 and layer flocks in Lancashire in July 2015.

Spread to other nearby farms was prevented by good biosecurity but even so, costs mounted as the result of cleaning and disinfection of the infected premises and more seriously, from the loss of some valuable exports markets for UK poultry and products.

Market segmentation and regulations

As a member of the European Union, conventional battery cages were no longer allowed in the UK from January 2012. Now, 51.5 per cent of UK egg production is from enriched (colony) cages, 43.8 per cent free-range, 2.4 per cent barn and 2.3 per cent organic production.

Here, it is the retailers that have the greatest effect on driving the markets with 53 per cent of total sales through retailers, 23 per cent via food service and 24 per cent of sales are in the form of egg products. All retail chains specify Lion quality; several only sell eggs from free-range systems, some of them applying the same rules to own-brand products containing eggs.

At times of high risk from AI infections, there is discussion in the EU generally over the length of time free-range hens may be housed without losing their designation and associated price premium. The current maximum period is 12 weeks, which Mr Williams described as “arbitrary”.

For the US, Proposition 2 came into force in January of 2015 in California, requiring producers to allow at least 750 square centimetres per hen. Although existing systems can still be used, the main thrust was to encourage producers to switch to colony cages.

The Shell Egg Food Safety Regulations require Salmonella vaccination and additional SE testing, similar to the Lion scheme in the UK, which is voluntary.

The US Regulations also specify the area needed per hen in groups of different sizes. A standard cage of 3,111 square centimetres is only large enough to house two birds but if the partition is removed to double the space, there is enough room for eight hens.

Latest figures reveal that there are now 23.6 million cage-free hens in the US - 8.6 per cent of the total. This has increased sharply since the previous steady figure of around six per cent as recently as March 2015.

In September, McDonald’s announced it will transition to 100 per cent cage-free eggs in the US and Canada in the next decade. While the chain only accounts for two per cent of egg consumption, it is likely that other companies will follow its example and producers appear to be investing either in cage-free systems or adaptable systems to comply with future market needs.

The biggest policy issue for the BEIC at the moment, according to Mr Williams, is beak trimming. In England, the Beak Trimming Action Group was set up to examine the situation, and the Minister is expected to make a final decision at the end of this year.

With very little information available on how to manage brown egg layers in commercial free-range flocks without beak-trimming, the BEIC was involved in three trials by Bristol University, which highlighted the likely challenges if a ban were to be introduced in the UK.

The BEIC sees beak trimming as a welfare issue and based on available research, it is supporting a delay to the total ban on beak trimming and continued use of the more welfare-friendly infra-red method until better solutions can be found.