December 24, 2010

New Zealand egg industry faces significant oversupply

The majority of poultry farmers in New Zealand are being forced to sell their eggs below cost as the unregulated industry faces significant oversupply, a Lichfield farmer said.

Paul van der Heyden, part-owner of Heyden Farms which runs a flock of 120,000 chickens, said the industry was cut-throat and unless farmers curtailed their production, many poultry farmers would be forced into bankruptcy.

"There is no money in it all at the moment," he said. "And it's impossible to sell farms. With feed prices predicted to go up, it's impossible to make a profit."

Egg trays selling for NZD5.50 (US$4.11), GST inclusive, are being sold below cost. "Either the producer or the retailer is losing money," van der Heyden said. Even a 3% or 4 % increase in egg production nationwide was enough to create a serious glut.

Other issues included the recession, forecasting stock production levels and a drop in sales six months ago.

Egg Producers Federation executive director Michael Brooks agreed there was an oversupply in the market place. "It's a case of market supply and it's a fully deregulated market," he said. He believes the focus for farmers should be on differentiating their brand. "Everyone has to find their market niche and sell to their consumers," he said.

New Zealanders eat an average 223 eggs per person per year, ranking above Britain (183) and Australia (196), but lower than the United States (283), the federation says.

Brooks said farms sizes had increased to assist in running costs, with pressures on margins for profitability. Grain accounts for almost 70% of an egg price. In the last five years an additional 300,000 laying hens were added to the national flock of 3.2 million laying hens which produced 972 million eggs in 2009. 50% of eggs are sourced by supermarkets, 18% for industry (including bakeries or egg powder) and the remainder used in cafes and sold at fruit and vegetable shops.

Last week the country's 135 barn, free-range, and cage egg producers voted to continue to fund an industry levy on egg production for a further six years.