FEED Business Worldwide - May, 2012

 

 

by F.E. OLIMPO in Bangkok

 

 

In 2011, Thai egg prices were skyrocketing. They had more than doubled to THB5/egg (US$0.16/egg)  on average, from only THB1.90/egg (US$0.06/egg) six months before. After years of poor returns, was this the golden year the sector had long sought?

 

 

 

Until that year, the industry was stuck in a huge oversupply problem that seemed to defy solution. Since 2008, Thailand had been producing 27 to 28 million eggs daily, approximately 2 million more than its daily consumption of 25 to 26 million a day.  The situation usually reaches crisis proportions in October every year, when the country celebrates a ten-day vegetarian festival. During this time, one third of the people shun all kinds of meat, including eggs. Layer farms typically end up with a surplus of 70 to 80 million eggs by the end of the festival.

 

Almost always, the government would spend the next two to three months grappling with plummeting egg prices. It would do everything imaginable including cap production, promote exports and encourage more domestic consumption -- to break the cycle. Nothing seemed to work. In 2010, it even had an ostentatious Egg Conference in the 2,500-capacity Grand Hall of the Bangkok International Trade and Exhibition Centre (BITEC), where it gathered farmers and industry leaders to discuss solutions to the annual glut problem. Despite all that hoopla, the conference came up with no concrete solution to the problem. It was all talk and a reprise of things both government and the industry wanted to do, which in reality were tall orders.

 

Boosting exports was the most-touted and in theory at least, a realistic idea. Brilliant in simplicity, it only had one problem – where in Asia to send all those eggs? Hong Kong, its lone market which takes in 22 to 23 million eggs a month, has long been saturated with tonnes of surplus eggs from prolific China, which singlehandedly accounts for about 45% of global egg output.

 

The Middle East and North Africa (MENA) is hungry for eggs but India, which has a far worse oversupply problem, has long eyed and penetrated those markets. After China and the US, India is the world's third largest egg producer. And at 1.8 kg, it has among the lowest per capita egg consumption around the world. Its exports to the Middle East and Africa, where Indian eggs enjoys price advantage over other imports, do much to sustain India's layer industry.

 

Europe, the United States and Japan, traditional markets for other Thai food exports, were sufficient in supplies and had no need for Thai eggs.

 

Except for production caps which requires awkward government restrictions on producers, the only viable option is to increase local consumption. Thailand's current per capita consumption is 160 eggs a day. They need to eat on average 200 eggs annually if they are to balance out supply with demand.

 

But this too is awkard: Thailand is a fast growing, developing country but eggs are the first protein line to see their consumption level out in prosperous times, as people prefer to buy meat when they become wealthier.

However, what the Egg Conference and the government failed to do, nature did. The following year, 2011, proved to be particularly too hot for the layers' comfort that they didn't lay the number of eggs they used to. The result was Thailand's first-ever egg shortage, which actually was a welcome respite for the farmers, since prices - and margins - had skyrocketed.

 

 

 

With the price of egg being a barometer of success of a particular administration's handling of the economy, there's no way the government would allow it to run berserk. So, to the farmers' dismay, the government imposed price ceilings and allowed free importation of parent stocks to quickly increase egg supplies. Price caps denied farmers their market returns and investment and the liberalization of layer imports should have crashed prices within months, but the latter did not happen.

 

Then, just as supplies began to swell, late 2011's flood damage destroyed many layers and disrupted egg production of surviving layers. Much to the dismay of local egg farmers who were hoping to recoup their flood losses with high prices, the government summarily purchased 3 million eggs from Malaysia to stabilise supplies.