Cracking demand for free-range

27 Oct, 2014 01:00 AM
Farmers and food service businesses are increasingly likely to be squeezed by the trend

DEMAND for free-range eggs has jumped more than 15 per cent in the past five years and now accounts for one in every five eggs produced in Australia.

Farmers deliver about four billion eggs to market annually, worth an estimated $659.6 million in 2014-15.

Cage egg production still dominates the industry and consumer buying preferences, but it is growing at less than two per cent a year as big retailers cash in on the popularity of free-range and organic marketing themes and reduce shelf space for lower priced cage egg lines.

While rising shopper awareness and concern with product provenance has encouraged shoppers to buy more free-range eggs, research group IBISWorld warns farmers and food service businesses are increasingly likely to be squeezed by the trend.

"There are significant costs associated with altering farming methods to switch to free-range production," said IBISWorld industry expert Brooke Tonkin.

Yet farmers who resisted the free-range trend ran the risk of being caught in an oversupply of cage eggs.

"As supermarkets and fast food outlets change their purchasing policies, cage eggs producers could find themselves having to accept lower prices from downstream players, or selling their eggs for processing into low-value powder," Ms Tonkin said.

At the other end of the food chain, cafes, restaurants and other food services already operated with tight margins and could face significant bottom line challenges because of the shift to more expensive free-range farm output.

Supermarkets sold about 1.5 billion eggs in 2014-15 with the major retail players using free-range brands to command an ever-increasing share of egg sales revenue and future volumes.

"Supermarkets have been quick to take advantage of the higher margins attached to free-range eggs, and are keenly advertising the responsible sourcing of their products to justify the price hike," said IBISWorld's Stephen Gargano.

The inelastic nature of egg demand had also given retailers considerable power in setting prices, leaving consumers who were drawn in by the free-range marketing message to be price-takers.

These shoppers had no choice but to accept the price jump.

However, Ms Tonkin noted consumers often understood the extra farming costs associated with free-range farming and believed the price rises were justified.

Woolworths would remove all cage eggs from its shelves, including its house brand, by 2018, while Coles no longer sold cage eggs under its house brand.

Aldi continued to resist the higher-priced trend because it was at odds with its efforts to be seen as a low-cost grocery option.

Back on the farm, Ms Tonkin said farmers faced the highest stakes in making the shift to non-cage egg production because they generally could not convert expensive existing cage-egg infrastructure into free-range farms, without acquiring extra land suitable for chooks to roam and feed on.

They also had to buy new and additional equipment or remodel existing barns.

While some farmers would recoup some of their costs through the higher prices for non-cage eggs, Ms Tonkin said some smaller players may be better off leaving the industry than making the transition.

IBISWorld noted production of organic eggs, which tended to be a segment of the free-range offering, grew almost 50pc annually in the past five years but was still only a 78 million eggs per year market.

Andrew Marshall

Andrew Marshall

is the national agribusiness writer for Fairfax Agricultural Media
Date: Newest first | Oldest first


27/10/2014 7:10:57 AM

"Free range" in Australia is a marketing con kicked off by Coles and matched by Woolies. Genuine free range is a niche industry whose product is too expensive most people. Hence the pretend free range, deceptively presented with pictures of chooks in green meadows. It would not surprise me if the higher price of pretend free range had a much higher retail margin than caged. And to guarantee consumer compliance, Coleworths will remove the cage option ...
28/10/2014 9:59:41 AM

Sadly , increase in the proportion of our eggs from free range will not reduce the stresses on our hen population as a whole. This situation affects those genuinely concerned about the welfare of our egg-laying birds . The well conducted relevant local studies with hens show that their stress levels are quite variable in all three major production systems ( cage, barn, free range) - no one system is superior re. stress i.e. there are good and poor producers in all 3 systems - some caged better than some free-range. Sadly, hen-welfare per se attracts little attention.
28/10/2014 10:37:36 AM

It is time that research was directed to determining the factors causing hens' stress. When these are understood we can introduce management systems for stress control. At the moment we place too much emphasis on systems WE think are low or low stress and assume, sometimes wrongly, that the hens thinks like us. It seems that large commercial bodies are now involved in affecting the marketing etc of free-range eggs etc. they should do the decent thing and finance the appropriate research that is needed. What they are doing is not achieving anything for the welfare of the hens.
David harrison
28/10/2014 2:16:10 PM

Elizabeth, the only way to provide low stress for the birds is to mimic their natural habitat. Wild fowl run as small flocks, with a single cock as lord and master. Hardly very productive or economical. By that, I mean productive and economical from the human point of view. From the birds point of view, it is quite satisfactory. Even then, their life is influenced by stress from all sides. Predators, illness, food availability, encroaching neighbours, shelter, water.. Only the fittest will survive and will even then it is unlikely they will live to see their grandchildren.
David harrison
28/10/2014 2:30:41 PM

Now take things from the human perspective. We supply the birds with food, water, shelter, protection from predators and vaccinate against diseases. This makes it economical and productive from our point of view. The birds are still stressed, but now it is because of overcrowding. I have an area of 2500 sq mt for my poultry. They have shelter, water and are fed morning and night. They are fenced in to protect them from predators, but I can't protect them from airborne predators. What I am trying to say is this: stress is ever present in spite of our best intentions.
29/10/2014 8:37:20 AM

Hi David - I'm sure you are doing your best re. the welfare of your hens and you have to be commended for doing so . The question that arises is whether there are other things you can do to reduce the stress on these birds. The answer is that there may well be further matters that need to be considered but at present we don't know what they are . The fact that we have much variation in hen stress levels in all three management systems highlights the potential for an ultimate overall reduction in hen stress . Research on lower and higher stress units will show what the real stressors are
David Harrison
30/10/2014 9:16:32 PM

Elizabeth, as you say, stress levels are comparable across all types of management systems. So what is the common denominator? I believe it has everything to do with the numbers that are kept in close proximity. The birds don't have their own personal space, so to speak. They are being kept in unnatural conditions. This suits us, and our management ease. It definitely goes against the birds natural instincts. As an analogy, look at the stress and problems found in all major cities, where people are crammed in together. Compare that with your smaller country towns. cont'd
David Harrison
30/10/2014 9:34:05 PM

There are still issues with stress, I will grant you. The intensity of that stress I believe would be much less. Most people in the smaller populations know each other, or are at least facially familiar. Definitely not the case in major populations where you would be lucky to know a fraction of these people. Being constantly surrounded by strangers, I feel, would be stressful. So in my opinion, we have 2 choices; let the birds live as small flocks as nature intended, or continue as we are, trying to minimise the stress in the systems we have. The former suits the birds, the latter suits us.
31/10/2014 8:51:04 AM

Hi David - your statement "There are still issues with stress" sums things up well. However, we should do something about this so that we can minimize the stress , hence the need for research on the problem . We can't just forget about it . Basic to that is the need to fully understand some existing situations such as why you can have low hen stress in some caged hen farms and why high stress can prevail in some free range farms . Firms like Woolworths could finally do something useful by providing funds for studies on hen layer stress but I doubt they would.
18/12/2014 7:18:05 PM

Lack of stress does not necessarily mean quality of life anyway. Measuring cortisol in cage hens deprived of interaction, movement but without the risk of predators compared with free range hens with a normal level of stimulation is not necessarily going to prove that lower stress equates with a better life!


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