18 August 2018 | Online since 2003

1 July 2014

Director of Policy Report July 2014

As expected the number of hens placed on free range units reached record levels this month, topping 15.5m birds for the first time according to the BEIC database. This follows higher levels of chick placements (all layers) in January, February and March compared to the equivalent months in 2013. Indeed the average numbers of layer chicks placed for the first five months of 2014 is just short of 3m per month. In 2013 the average shown in the BEIC database is 2.79m per month. Projected forward for the year, this would suggest an extra 2m chicks will be placed in 2014.

As a result the growth in hens housing capacity has grown every month this year from 16.5m free range hens in January to just shy of 17.0 hens in June. This is higher than the 15.5 hens referred to above because it is the maximum number of birds that the BEIC register shows can be housed, rather than the actual number of birds in sheds.

While this growth in capacity of 0.5m birds in free range is a concern, it is far exceeded by what is going on in the enriched cage sector where the number of birds housed has jumped from 13.0m in February to just shy of 14.5m this month, a growth of over 11% in 4 months. In fact most of this growth has happened over the last couple of months with enriched capacity rising by 1m hens between April and May.

So what is going on and what does it mean for us? Clearly it is not good news as it seems improbable that consumption (or exports) will grow to soak up this capacity of nearly 35m hens.

The only way of working out objectively the future consequences of the current position of the industry is to use mathematical modelling techniques. BFREPA, with the support of NEMAL (the packers body), has developed a model that has proved itself to be accurate at forecasting future trends based on current knowledge. The latest run of the model has been commissioned for discussion at an upcoming BFREPA/NEMAL meeting.

The graph shows actual production (throughput) in red as against the model forecast in yellow. As can be seen the model is predicting the trends well even though it seems to exaggerate the ups and downs. This makes sense as the supply chain adapts to the booms and busts to smooth out supply.

However the forecast increase in production from now until the middle of next year is alarming, even if it is found to be slightly exaggerated. It may be that the well reported promotional activity by retailers can continue to shift free range egg without damaging producer prices but that seems to be a long shot. There will be a price correction to rebalance supply and demand and the model predicts how this will unfold.

The price forecast will be published next month after the meeting with NEMAL on 9 July. Both BFREPA and NEMAL have taken steps to improve the level of market intelligence available to producers – via the model and the BEIC database reports - and it up to members to make the right decisions for their businesses. The problem is that putting up another shed may be the right decision for producers in the short term. However it may not be the right decision for the industry and will hurt producer businesses in the medium and long term.


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