APPENDIX 33
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.
Conclusion
— 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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