Select Committee on Environment, Food and Rural Affairs Appendices to the Minutes of Evidence


Memorandum submitted by the British Egg Industry Council (BEIC) (A44)

  The BEIC welcomes the opportunity to submit comments to the Environment, Food and Rural Affairs Committee of the House of Commons on their inquiry into the Future of UK Agriculture: Farming beyond Subsidies.

Background to the BEIC

  The BEIC is an inter-professional organisation of 11 trade associations in the UK, which cover all aspects of the egg industry—breeding, hatching, rearing, laying, packing, egg processing and marketing (Annex).

  The principle function of the BEIC is to represent the interests of its Members (the UK egg industry) in discussions with Government, MPs, the European Commission, European Parliament, and other bodies. BEIC finances the Lion Quality advertising and public relations campaign, and finances research and development. BEIC is recognised by Government and Parliament as the representative voice of the UK egg industry.

  BEIC is funded exclusively by a voluntary levy on a number of packers and producer/packers who between them represent 75 per cent of egg output in the UK. These "Subscribers" to the BEIC adhere to the "Lion" Code of Practice, which sets higher standards of both hygiene and animal welfare than is currently required by UK or EU law. Subscribers are authorised to use the "Lion Quality" registered trademark, which is owned by the BEIC.

Background facts on the UK industry

  The UK is the sixth largest egg producer in the EU after France, Germany, Italy, Spain and the Netherlands. During 2000, the UK was 92 per cent self sufficient in eggs.

  There are currently some 30 million laying hens in the UK, housed in both conventional cage and non-cage (free range and barn) systems of egg production. During 2000, 74 per cent of eggs were produced from birds housed in conventional cages, 20 per cent from free range and 6 per cent from barn systems. This compares with some 273 million laying hens in the EU, of which 90 per cent are housed in conventional cages.

  The value of egg output in the UK in 2000 was £368 million (ex-farm, eggs for human consumption). In terms of market volume, approximately 65 per cent of eggs were sold at retail level, 17.5 per cent were purchased by the catering sector and 17.5 per cent were manufactured/processed into various egg products.

  The UK egg industry is a significant employer of labour. It is estimated that between 7,000 and 10,000 persons are employed directly by the UK egg industry, with a further 13,000 directly employed in ancillary industries (eggs and poultrymeat).

  The UK laying flock consumes a sizeable proportion of the total grain fed to livestock—820,000 tonnes per annum. The egg industry is therefore a significant purchaser of UK cereals.

Market Support measures

  The egg industry does not benefit directly from any market support mechanisms (subsidies). There is limited funding towards export subsidies to take account of the high cost of grain as a result of CAP policies. However, UK exporters in the main do not benefit as there are negligible exports to third countries.

  The industry is therefore subject to the vagaries of the marketplace, which has become increasingly competitive. In addition, egg producers are working on very narrow (or negative) margins.

  Within the EU there is free movement of eggs and egg products. Until the GATT Uruguay Round, the EU egg market was protected from imports from third countries by a system of variable levies and sluicegate prices, which reflected the higher cost of cereals in the EU. Following tariffication, these have been replaced by a system of duties and a special safeguard clause based on reference prices.

  The egg industry is subjected to a considerable amount of legislation on; egg marketing standards, food safety, environment, and animal welfare (which is often conflicting). In addition, the industry is affected by other more general legislation, for example, on planning matters.

The forthcoming round of trade liberalisation negotiations

  We have confined our comments to our concerns on our future competitiveness in light of further liberalisation of world trade.

  New animal welfare legislation in the form of Council Directive 1999/74/EC will increase the cost of production in all systems (cage, barn and free range), at the same time as a new round of trade liberalisation negotiations are likely to result in a reduction in import tariffs and allow greater market access.

  While the UK Government's and EU position is for further liberalisation, which it is claimed would benefit the economy as a whole, we would stress that successive UK Governments have encouraged the private sector to improve their efficiency (by both reducing costs and adding value) and responding to consumers' needs. The egg industry has responded to this challenge. We are arguably one of, if not, the most efficient sectors of UK agriculture. Consumer demand in recent years has resulted in the UK egg industry leading the way in the number of free range and barn laying hens in the EU (46 per cent and 61 per cent respectively).

  In the EC's Comprehensive Negotiating Proposal, three issues were identified as areas which could assist in maintaining the competitiveness of the EU egg industry. These were; negotiating animal welfare standards into a multilateral agreement; labelling; and support payments to producers to take account of increased costs of animal welfare legislation.

  Animal welfare standards—On the issue of negotiating animal welfare standards into a multilateral agreement, we are aware that other trading blocs regard the EU's proposal as protectionist, and will fight to resist such measures. Even if such standards were to be included, they would only be minimum standards, while the UK/EU industry adopted much higher standards.

  Labelling—On the issue of labelling of eggs, a recent amendment to the Egg Marketing Regulations (Commission Regulation 5/2001/EC) will introduce compulsory labelling of all eggs from 1 January 2004. The Commission believes that by identifying EU eggs produced to higher animal welfare standards (and therefore more costly eggs), EU consumers will purchase such eggs in preference to those produced in third countries. This is quite simply not the case. We have consistently argued that price is the most important factor in consumers' purchasing decisions. This was confirmed in a recent poll carried out for the Food Standards Agency which showed that price is top of the shopping list for nearly half of all consumers when it comes to buying groceries. In addition, in order not to infringe WTO rules, the requirements for labelling third country imports were watered down.

  In addition, the Commission has proposed a Directive for the registration of establishments keeping laying hens' which will require a producer establishment code to be printed on every egg from 1 January 2004. The BEIC welcomes this and has made constructive proposals to both DEFRA and the Commission on how this should be constituted. However, we believe that if it is intended that this code should enable eggs to be traced to source to assist food safety, it rather makes a mockery of traceability if third country imports are not required to meet the same standards as those required for eggs produced in the EU.

  We question how Government (and the Commission and Council) expects our industry (which is at the forefront of the marketplace) to remain competitive with these apparent double standards?

  Compensatory payments—Whilst the making of compensatory payments to EU producers, which are protected in the "Green box", would be one route of securing recognition of the egg industry's higher animal welfare standards, budgetary pressures in the EU (especially following enlargement) may lead to the reduction, or eventual removal, of such payments, leaving EU producers unable to complete with imports from third countries.

  It is the effects on the fast growing egg products sector that would be most severe as this sector is most vulnerable to third country imports. Changing lifestyles within the UK and EU are leading to the greater consumption of prepared food, with less food being prepared and eaten at home. This is increasing the use of egg products (as food ingredients) and it is anticipated that the proportion of UK egg production which is consumed as egg products will increase from the current level of 20 per cent to 30 per cent by 2012 (25 per cent to 40 per cent in the EU). By comparison, 30 per cent of eggs are currently processed in the USA, and this is forecast to increase to 50 per cent by 2010.

  Egg products generally, and egg powders in particular, can be transported internationally at low cost. Both UK and European food manufacturers buy ingredients based on quality and cost, with the origin of these products not a key purchasing issue. These companies increasingly pursue global purchasing strategies.

  To confirm our concerns, we have asked a respected poultry economist to carry out a study into the effects on our future competitiveness of the new welfare Directive and further liberalisation of World trade. We propose to make this study available to the Committee, Ministers, Officials and the Commission.

  If the UK loses its egg products sector, there will be a knock-on effect to other sectors. There will be adverse effects on the tonnage of cereals used, and on employment opportunities in both the egg industry and ancillary industries.


    —  It is true to say that UK farmers are faced with an impossible task in producing food to yet higher standards of food safety and animal welfare but at an increasingly lower cost. The high strength of Sterling has also been a contributory factor that has effectively brought many sectors of UK agriculture to their knees.

    —  With the growth of global retailers and further rationalisation in the retail/catering sectors, we see little respite from downward pressure on prices. However, this must be addressed to ensure a future for UK agriculture.

    —  The Lion Quality Scheme is one of the few good news stories for UK agriculture. This has required £24 million investment in improving food safety standards and communicating the Scheme to consumers.

    —  UK egg producers already comply with stringent UK/EU legislative requirements, which our competitors in third countries are not subjected to. Recent food crises have also resulted in new and proposed legislation on an EU wide basis. These will add further costs, at the same time as there is likely to be greater trade liberalisation, which will allow for reduced import tariffs and increased access to our market, rendering UK producers uncompetitive.

    —  To meet new animal welfare legislation considerable capital investment will be required. Otherwise, our industry will relocate to those countries where animal welfare is not such a priority. For the sake of clarity, in the UK the capital costs of complying with this legislation will be £488 million. In addition, the additional running costs will be £123 million per annum. If it is considered that industry profitability in a "good" year is only some £10 million, then it is clear that the industry is simply unable to make this investment without financial assistance.

    —  We remain deeply concerned at the seemingly conflicting goals of trade liberalisation, which will lead to an increase in the import of low cost (and possibly lower food safety/animal welfare standard) products from third countries, at the same time as more stringent legislation is required of UK and EU producers, and which will increase costs.

    —  Failure to provide for the conditions that allow us to remain competitive will lead to increased imports of eggs and egg products produced to lower animal welfare standards. Besides the adverse commercial effects on the egg industry, animal welfare will also be the loser.

  We are very willing to provide further information or give oral evidence if necessary.

British Egg Industry Council

19 December 2001

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