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Egg and Egg Products
Anemic global economic growth in 1999 is expected to slow egg consumption and trade by selected countries. Aggressive use of EU export subsidies in 1998 moved the EU into position as the world's largest exporter. The United States lost market share and exports will continue to be under pressure in 1999.
Overview
As projections of economic growth outside the United States slide to less than 1 percent in 1999, a slowing in egg import growth is expected to fuel intense competition between exporters. While egg consumption by selected countries is expected to grow 3 percent in 1999 to 688.7 billion pieces, this is slightly below the 4-percent gains witnessed since the mid-1980's.
Slow Asian demand for imports of table eggs and egg products in 1998 is expected to continue into 1999, limiting overall imports to 5.1 billion pieces, up only 1 percent over 1998. Aggressive egg marketing by EU exporters eroded U.S. exports in 1998 with only a limited recovery expected in 1999.
Asian Crisis Slows Global Demand for Eggs
Global demand for egg and egg products hinges closely on economic developments in Japan and Hong Kong which are forecast in 1999 to account for nearly 65 percent of imports by selected countries.
Egg consumption in Japan, a mature market that boasts one of the highest per capita egg consumption levels in the world-347 eggs per capita-is forecast to continue its pattern of decline into 1999. Imports, however, are expected to remain stable at 1.73 billion pieces as low domestic prices in 1998 forced producers to reduce output.
While weak in the beginning of the year, demand for imports, particularly egg products, in 1998 gradually recovered later in the year as consumption strengthened in the retail sector. The recovery in imports is mostly attributed to the import growth of powdered products, which more than offset the large decline forecast for liquid product imports in 1998. In the fourth quarter, bulk purchases of dry egg products (egg yolk, albumen, and whole egg powder) by confection bakery, desserts, and ham and sausage product markets strengthened, more than offsetting the decline in imports of frozen eggs and egg yolks.
The largest supplier of eggs to Japan is the EU, followed closely by the United States which, in 1998, shipped the shell egg equivalent of nearly 510 million pieces. The EU and the United States are estimated to have supplied nearly 70 percent of total Japanese egg import demand in 1998.
The "avian-flu" outbreak in Hong Kong in late 1997 resulted in lower egg consumption and imports in 1998. However, consumption, supplied exclusively through imports, is expected to strengthen slightly in 1999 to more than 1.5 billion pieces.
The market for eggs in Hong Kong in 1998 was characterized by strong competition between international suppliers and lower prices as EU subsidized product dramatically increased its market share. While China and the United States maintained their positions as major suppliers to the Hong Kong egg market, their exports to Hong Kong through September 1998, dropped 28 percent and 22 percent, respectively.
The competitiveness of Dutch and German eggs was enhanced by a variety of factors that allowed them to reduce their prices: high export subsidies, exchange rate advantages against the high value of the dollar, and cargo discounts on product moving to Asia.
South of the Border: Mexico
As Mexican egg producers respond in 1999 to prices that are lower than the cost of production by slowing output growth, imports of eggs are forecast to be above the NAFTA TRQ level of 7,535 tons (140 million pieces).
Unfortunately imports of fresh eggs, sourced from the United States, have remained limited due to a combination of higher U.S. prices and Mexico's rigid TRQ auction system. Nearly 80 percent of the overall TRQ in 1998 was filled with hatching eggs which were in strong demand by local egg producers due to outbreaks of Avian Leukosis in Mexico.
U.S. table eggs have captured some market niches in northern consumer centers far from producing regions. Egg imports, particularly table eggs, while forecast to increase 4 percent in 1999 to 263 million pieces, are threatened by the imposition of a Mexican regulation that imported refrigerated table eggs and egg products be kept refrigerated until they reach the final consumer. Given the lack of a continuous cold chain throughout the retail level in Mexico, it would be difficult for imported table eggs which are shipped to Mexico in refrigerated containers to adhere to this requirement.
The United States Loses Market Share in 1998
Strong competition with subsidized EU egg exports in 1998 dropped the U.S. share of the global egg market in 1998. A 4-percent drop in U.S. egg exports to 2.625 million pieces garnered the U.S. market only 33 percent of global trade in 1998, down from 36 percent in 1997and 48 percent in 1996.
While the overall value of U.S. egg and egg product exports rallied to reach a record $223 million in 1998, the usual strength provided by egg product shipments was eroded by weak Asian demand. Exports to Japan, which accounts for nearly half of U.S. shipments of egg products, dropped 20 percent as stagnant Japanese consumption and the relative strength of the dollar constrained shipments.
An astonishing 43-percent surge in demand for U.S. hatching eggs from our North American neighbors-Mexico and Canada-stemmed from disease issues affecting the breeding flocks in these countries. The export gains realized by the U.S. hatching industry in 1998 were not matched by table egg exports which continued their precipitous fall. Weak demand by Hong Kong, Mexico and the EU prompted a 20- percent decline in U.S. shipments to 48.7 million dozen, the lowest level since 1990.
Demand for U.S. egg and product exports is expected to strengthen slightly in 1999 as higher EU prices in Asian markets reduce their export competitiveness. U.S exports are expected to reach 2.64 billion pieces in 1999.
EU Exports to Lose Ground in 1999
Low EU egg prices in 1998 as oversupplies, compounded by constrained EU consumer demand in the aftermath of the BSE crisis, prompted a 6-percent increase in EU exports. Product movement which reached 2.8 billion pieces in 1998 was supported by aggressive use of EU egg subsidies which moved up to $0.13/dozen by late in the year.
A drop in Dutch wholesale prices to $0.36/dozen in 1998 induced strong gains in egg exports to third countries, specifically Hong Kong, and those in the Gulf and Africa. The Netherlands, accounting for nearly 70 percent of EU exports to third countries in 1998, shipped 80 percent of its eggs to five markets: Hong Kong, Angola, Switzerland, the UAE, and Oman.
Low industry profitability in 1998 is stabilizing 1999 EU output at a forecast 82.7 billion pieces. Egg shipments are expected to slide 1 percent as higher EU egg prices in 1999, combined with a 5-percent decline in the WTO-limits on EU export allocations, limit the EU's competitive position. The progressive weakening of the Euro relative to the dollar, however, holds the potential to partially compensate for higher EU egg prices in 1999.
China Exports Challenged by EU's Presence in the Hong Kong Market
China's egg market, which suffered from overproduction in late 1997 and low prices through the middle of 1998, appears to have stabilized in 1999. Production growth has slowed to a projected 5 percent and is expected to reach 380 billion pieces in 1999.
While China's output growth has slowed from the 11-percent gains witnessed since the mid-1980's, China-which already accounts for 50 percent of production by selected countries-will continue to dominate the global egg market in the future. The Chinese government's policy on maintaining price controls on eggs as an important food staple, providing subsidies to producers, and potential growth in egg consumption among the rural population implies continued strong egg production gains.
Growing egg demand from Hong Kong allowed China to jockey into position as the world's third largest egg exporter, after the EU and the United States. Strong competition from subsidized EU eggs in the Hong Kong market in 1998 put a lid on China's egg export growth, as egg shipments dropped 9 percent to 900 million pieces. China's egg exports are expected in 1999 as EU egg exports become less competitive.
Mixed Outlook for Other Asian Competitors
Overproduction and low prices in 1997 induced Thai egg producers to cull their breeding layer stocks in 1998. Egg production in 1999 is projected to be unchanged , with only a slight recover expected in the second half of the year. In an effort to lift egg prices in 1998, the government allocated a no-interest loan to egg producer cooperatives and an egg trader association for buying domestic eggs and storing them in buffer stocks. However, the fund is not presently operational as egg prices exceeded the government's set target price.
In early 1998, a group of large layer farms exported surplus eggs to Hong Kong in their effort to boost domestic egg prices. However, egg exports dropped sharply in the second half of 1998 as increasing domestic prices rendered Thai eggs uncompetitive. Total egg exports in 1998, however, doubled over 1997 to reach 99 million pieces. Exports in 1999 are expected to be close to the 1998 level.
Indian exports of eggs and egg products increased more than tenfold between 1996 and 1997as proximity and price facilitated a brisk trade of table and hatching eggs between Indian and Middle Eastern markets. Robust demand for Indian eggs and products is expected to remain high in 1999 with exports increasing to 400 million pieces.
While egg powder shipments underpinned the strong export gains evidenced since 1997, stringent quality standards demanded by buyers in Japan and the EU, combined with the economic crisis in Asia, damped demand for Indian powder from these markets in 1997. Market sources indicate that of the five egg powder production facilities located in India, only two remain operational. However, these two producers have taken measures to address the concerns of India's major export markets for egg powder which include Japan, Germany, and other EU countries.
For further information, contact Nancy Morgan, (202) 720-1372.
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