Hans-Wilhelm WINDHORST
Director of the Institute of Spatial Analysis and Planning in Areas of Intensive Agriculture (ISPA),
University of Vechta,
Germany
The setting
Besides China, which contributed 41.4 % to global egg production in 2006, the USA ranked second with a share of 8.8 %, followed by India and Japan. In 2005, the USA ranked number seven among the top ten egg exporting countries with an export volume of 74,000 t. The contribution to global egg exports was 6.3 %.
In this paper, the recent dynamics and spatial patterns of U.S. egg production and trade will be analysed. In addition, projections of egg production and exports until 2017 will be presented.
The role of egg production in U.S. agriculture
In contrast to poultry meat (see Zootecnica International 2008, no. 6), egg production does not play a major role in U.S. agriculture, even though this sector of the livestock industry contributed 2.4 % to the value of agricultural production in 2007 (Table 1). Between 2005 and 2007, the value increased by 2.3 bill. $. This is the result of higher feed costs, an increasing domestic demand, and a growing export volume. Nevertheless, the role of egg production must not be underestimated, for its value was about 500 mill. $ higher than that of cotton production.
The development of U.S. egg production between 2000 and 2007
In a first step, this analysis will deal with the development of egg production between 2000 and 2007.
Table 2 shows that the value of U.S. poultry production increased by10.7 billion $ or 50.3 % between 2000 and 2007. The growth rates for broiler meat and eggs were almost identical whereas turkey meat fell far behind with only 31.2 %. The value of egg production varied considerably from one year to the other. Between 2002 and 2003 it increased by over 1 billion $, remained fairly stable the following year and decreased again by almost 1.3 billion $ between 2004 and 2005. A dramatic increase in the value of production can be observed between 2006 and 2007. It will have to be analysed which steering factors caused this development.
From the data in Table 3 one can easily see that the number of layers at hand increased continuously between 2000 and 2006. One has to keep in mind, however, that the layers produce eggs for consumption as well as hatching eggs for pullets and broilers. Broiler meat production grew by 3.5 mill. t in the analysed time period. This resulted in an expansion of the layer flocks for hatching eggs in the broiler industry. The comparatively high egg prices in 2003 and 2004 initiated higher placements of chicks for table egg production (Table 4). Per capita consumption did, however, not increase in the same way. The opposite was the case, for it decreased from 257 eggs in 2004 to 255 eggs in 2005. The consequence was a collapse of egg prices and a dramatic reduction of the number of layers in 2007. By these drastic measures, the egg price could be stabilised which helped the industry to become profitable again in spite of rising feed costs (Table 5).
The changing spatial pattern of U.S. egg production
In a second step, the changing spatial pattern of egg production will be analysed. From Table 6 one can see that the composition of the ten leading states in egg production did not change very much in the analysed time period. Only Minnesota was replaced by North Carolina.
The same is true for the regional concentration. The contribution of the ten leading states to total production hovered around 64 %. A closer look at the ranking of the states reveals, however, that the spatial pattern changed considerably.
In 2000, Ohio was the leading egg producing state with over 31 mill. layers and a production volume of 8.2 billion eggs. Iowa and Pennsylvania ranked as number two and three. Seven years later, Iowa had reached a dominating position in the U.S. egg industry. The number of layers at hand had increased by over 21 mill birds, the production by 6.3 billion eggs. The contribution to total egg production climbed from 9.0 % to 15.3 %. In contrast, Ohio lost 4.5 million layers in the analysed time period, the production volume decreased by 1 billion eggs.
This development is closely related to the lasting discussion about the closure of former Croton Egg Farms, which were bought by Decoster Egg Farms and now run under Ohio Fresh Eggs. California, on fourth place in 2000, was ranked number 6 in 2007. This state lost 4.8 million layers and production dropped by almost 1.4 billion eggs. This sharp reduction is a result of constantly rising feed prices because of high irrigation costs in the Central Valley and growing transportation costs for feed components from the Midwest. In addition, stricter environmental directives and high-energy prices have reduced the competitiveness of egg producers in California.
In Georgia, Arkansas, and North Carolina, large amounts of the production volume are hatching eggs for the broiler industry. In 2007, Georgia produced 2.6 billion table eggs and 2.2 billion hatching eggs. In Arkansas, hatching egg production (2.1 billion) was even higher than table egg production (1.2 billion).
Figures 1 and 2 show the spatial distribution of layer flocks and of egg production. One cluster reaches from Nebraska to Pennsylvania. Here, the production of table eggs for the agglomerations along the Atlantic coast and at the Great Lakes is concentrated. The second cluster is closely related to the centres of broiler production in the Southeast. Besides table eggs, large amounts of hatching eggs are produced. This cluster reaches from Texas to South Carolina. An exemption is Mississippi. In this state, the headquarter of Cal-Maine Foods, the number one egg producing company, and several large egg farms are located. A third cluster developed along the Pacific coast. Because of the long transportation distances from the centres of egg production in the Midwest, the egg demand is mainly met by local egg companies such as Valley Fresh Foods (California), Willamette Egg Farms (Oregon) and Wilcox Farms (Washington).
The sectoral concentration process is going on
As in all livestock branches, sectoral concentration has been going on for decades in egg production. The main steering factors are a parallel consolidation in the food chains and economies of scale, i. e. a reduction of production costs with increasing layer flocks. This made eggs one of the most valuable and affordable food.
A comparison of the ten leading companies in 1998 and 2007 shows that their share of table egg flocks increased from 35.6 % to 43.5 %. Cal-Maine Foods and Rose Acre Farms grew parallel and could fasten their leading positions. Michael Foods Egg Products, the leading U.S. company in egg processing, could fasten its third rank in spite of a decrease of their hen population by 1 million. Decoster Egg Farms are ranked as number 6 with 10.5 million layers. The company controls, however, a considerable higher share of the U.S. egg industry. In 2007, Decoster bought Ohio Fresh Eggs, the former Buckeye Egg Farms, and has also egg farms in Iowa.
Export patterns
In contrast to poultry meat, the USA are not in a top position regarding global egg exports. This is mainly due to the comparatively isolated location. As table eggs cannot be frozen, transportation distances have either to be short or the exported eggs can only be used for further processing. So it is not surprising that egg exports only contribute about 0.4 % to the value of agricultural exports (Table 8). In contrast, the contribution of poultry meat was as high as 3.7 % in 2007. Because of the volatility of the egg prices, the export value of eggs varied between 3.3 % and 6.2 % of the total value of egg production (Table 9). Broiler meat exports had a share of 10.8 % in 2007 (see Zootecnica International 2008, no. 6).
Between 2000 and 2007, the value of egg exports increased from 173 mill. $ to 318 mill. $ or by almost 84 %. It increased faster than the value of domestic egg production and of agricultural exports. Quite obviously, the leading exporting companies have been able to find new markets for their surplus production. This can be documented by the data in Table 10. One can easily see that the share of ten leading importing countries fell from 82.7 % to 76.4 % in the analysed time period.
A closer analysis of the composition and ranking of the ten leading countries of destination reveals that because of the above-mentioned problems to transport shell eggs over long distances, Canada and Mexico, the two NAFTA partner countries, rank as numbers one and three.
In 2000, 34.3% of the exports were directed to these two countries, in 2007, their share had dropped to 28.8%. Japan still ranked on second place in 2007 in spite of a decreasing value of egg imports. It is surprising that three EU member states are to be found among the top ten importing countries for U.S. shell eggs. Most of the traded eggs are hatching eggs, this is also the case with Japanese imports.
Because of the high value of these eggs, they are often transported by plane. Brazil, the Netherlands and Trinidad and Tobago replaced Nicaragua, the Republic of Korea and France. It is worth mentioning that in contrast to broiler and turkey meat, egg exports are not concentrated on one or two countries. This is mainly due to the fact that some of the leading hybrid companies for laying hens (such as Hy-Line International, Des Moines, Iowa) are located in the USA and that large amounts of hatching eggs from grandparent stock are exported all over the world.
The main results of the first steps of this analysis can be summarised as follows:
- The contribution of the egg industry to U.S. agricultural production varied between 1.7 % and 2.4 % over the last years.
- The volatility of egg prices had the consequence that the value of egg production varied considerably from year to year. A lasting phase of low market prices led to a drastic reduction of the laying hen flocks in 2007. A remarkable increase in egg prices was the result and the industry could remain profitable in spite of rising feed costs.
- The spatial pattern of egg production differs considerably from broiler production. Three clusters, one in the former corn belt, one in the Southeast and one along the Pacific coast can be distinguished.
- Egg exports contribute only about 0.4 % to U.S. agricultural exports. This is mainly due to the isolated location of the USA and the fact that shell eggs cannot be frozen. The export of hatching eggs from leading hybrid companies to a great number of countries has become more and more important.
Production and export perspectives until 2017
In a final step, this analysis will present projections of the development of egg production and exports until 2017. The projections are based on the USDA Agricultural Long-term Projections to 2017 und the FAPRI 2008 Agricultural Outlook.
An important steering factor in the future development of U.S. egg production will be the dynamics in per capita consumption. In contrast to poultry meat, the egg industry is confronted with a number of challenges, which ask for reactions. One is the lasting discussion about the health risk connected with egg consumption because of the high cholesterol content, the other, the just beginning welfare discussion which aims at forbidding conventional cages. Both, United Egg Producers and the American Egg Board, have been working for years in these fields and been quite successful. The American Egg Board´s campaign "The incredible edible egg" has been able to stop the downward trend of egg consumption und in connection with research work, financed through United Egg Producers, also helped to inform the consumers about the nutritional value of eggs. In spite of these activities, FAPRI projects a decrease of per capita egg consumption by 5 eggs or 1.9 % until 2017. The USDA is a bit more optimistic. It expects a downward trend until 2012 and an increase from then on until 2017 (Table 11).
A second important steering factor for the future development of egg production is the ability of U. S egg companies to find new markets for eggs which cannot be sold on the domestic market. From the data in Table 12 one can see that the projections of the USDA and FAPRI differ considerably. Starting from the same basis, export of 2.76 billion eggs in 2008, the USDA expects an increase of the export volume until 2017 by 33.0 %, FAPRI of only 11.7 %. Even though Avian Influenza outbreaks have not very much impacted global egg demand in the past, the threat of such outbreaks may limit U.S. exports in future, is one argument of FAPRI.
Based on their projections of per capita consumption and exports, the USDA and FAPRI presented perspectives for the development of egg production (Table 13). FAPRI projects a 2.6 billion eggs lower production volume in 2017 than the USDA. The difference is a result of the less optimistic assumption of the development of egg consumption and export possibilities. The increase in egg production is therefore mainly a consequence of the expected population growth of about 25 mill. people within the next decade.
If the projected production volume can be reached, depends on a number of steering factors. One is the threat of Avian Influenza outbreaks in the centres of poultry production in Europe or North America. This will have impacts on egg consumption even though the past outbreaks hardly impacted this product. A second is the accelerating discussion about keeping laying hens in battery cages. The Humane Society of the United States is the primary sponsor of California's Prevention of Farm Animal Cruelty Act, which, if passed by voters on November 4, 2008, will prohibit keeping laying hens in battery cages after 2015. This initiative could have far reaching impacts on the U.S. egg industry as other states may follow with similar acts. A third steering factor is the development of feed prices. The recent increase of feed costs is not only a result of the boom of bio-energy production, but the expansion of the bio-fuel industry has definitely added to this development (see Windhorst, 2007). If the trend cannot be stopped, consumers may reduce their egg consumption because of higher food costs in general. Serious economic problems for the egg industry could be the consequence.
The main results of the perspectives on the future development of egg production and egg exports can be summarised as follows:
- The dynamics of egg production in the USA until 2017 will depend on the development of per capita egg consumption. The USDA and FAPRI estimate either a minor increase or even a decrease.
- Egg exports will increase over the next decade according to USDA and FAPRI projections. But it will also in future be mostly hatching eggs and eggs for further processing. Japan and some EU member states will also in future be the main countries of destination besides the two NAFTA partners, Canada and Mexico.
- The threat of Avian Influenza outbreaks, the ongoing animal welfare discussion, and rising feed costs will be important steering factors for the future development of egg consumption and egg production. Table egg exports will also in future be of minor importance for the U.S. egg industry.
References
Food and Policy Research Institute (FAPRI, ed.): 2008 Agricultural Outlook. Ames, Iowa 2008.
Trostle, R.: Global Agricultural Supply and Demand: Factors Contributing to the Recent Increase in Food Commodity Prices. (= WRS-0801). Washington, D.C.: USDA, Economic Research Service 2008.
USDA, Foreign Agricultural Service: Livestock and Poultry: World Markets and Trade. (= Circular Series DL&P 1-08). Washington, D.C. 2008.
USDA, National Agricultural Statistics Service: Chicken and Eggs Summary. Washington, D.C. Various editions.
USDA, National Agricultural Statistics Service: Poultry Production and Value Summary. Washington, D.C. Various editions.
USDA, Office of the Chief Economist (ed.): USDA Agricultural Long-term Projections to 2017 (= OCE-2008-1). Washington, D.C. 2008.
Windhorst, H.-W.: Bio-energy production - a threat to the global egg industry? In: World´s Poultry Science Journal 63 (2007), S. 365-379.
