July 23, 2010

Thailand's solution to high egg prices could be harmful

The government's decision to free layer chicken parent stock imports to solve skyrocketing egg prices could lead to unstable prices next year unless more effective management is applied, traders warned.

The government has revoked the import quota system for parent-stock layers due to high egg prices in recent weeks, which has been managed by the Egg Board, or the Committee for the Development of Lay Chicken and Products, since 2002.

"Though I agreed with the free import idea, the government still needs to regulate imports to prevent any surplus at any certain areas in order to stabilise egg prices," said Saneh Kanasuta, vice-president of the Hen-Egg Farmers, Traders and Exporters Association. Mr Saneh expects to see more new players in the business but he believes that only those with strong financial support will survive.

"To operate the egg business, it's not only necessary to import parent-stock layers but the entire operation includes the investment in hatchery farms, marketing and expenses, especially unpredictable feed costs," said Mr Saneh.

High parent stock imports would prop up the number of layers and lead to unstable egg prices and small farmers would definitely suffer, as happened before 2002. Chaired by the agriculture minister, the Egg Board was set up in that year to manage the volatile industry by setting an import quota of layer parent stock at 407,000 chicks for 2003, based on a population of 62 million and egg consumption of 135 per head per year.

The objective was egg price stability through production control by limiting the number of parent stock and layers sold to raisers. The quota is 405,721 parent stocks this year and it has been allocated to only nine companies to produce 37 million layers, which would produce approximately 10.8 billion eggs.

The limit in the number of importers displeases newcomers and recently 113 layer farmers have lodged a complaint with the Administrative Court. Thailand Development Research Institute (TDRI) economist Duenden Nikomborirak said high egg prices have reflected unfair trade practices and business monopolies by big companies.

Nikomborirak said the quota system benefited large corporations. This year, CPF received the highest allocation, at 41% of the import total. Farmers have faced a double impact. The shortage of layer parent stock has lifted prices of pullets, also supplied by big companies. But farmers face higher business risk, when they buy feed from these big companies.

She was not convinced that free imports of layer parent stock would solve the problem. "It might ease the current shortage of birds but would eventually lead to an oversupply of eggs," she said.