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Choose the chicken not the egg
if you want to make money
W
hile egg farmers face fluctuating input costs and low margins, the profit received by poultry meat farmers is claimed to be higher and more stable according to a recent IBISWorld report. Egg consumption is on the increase in Australia partly driven by the successful change in consumer perception about the relationship between egg consumption and high cholesterol. IBISWorld estimates that revenue for the egg farming industry will grow at an annualised 3.5% over the five years through 2013-14, to reach $575.6 million. This growth figure is inflated by rapid growth following the global financial crisis. This growth is good news for egg farmers but the process farmers receive is under considerable downward pressure. The lack of legally binding standards for egg certification is limiting the prices that free-range eggs can command and at the same time private-label eggs dominate supermarket sales further limiting profits to egg farmers. The poultry meat market is dominated just two processors - Baiada Poultry and Inghams Enterprises. Even though the poultry meat farming industry is characterised by a large number of small farms, most of these enterprises are contracted to supply their poultry to the two major processors. Under the terms of these contracts, processors generally pay for the majority of input costs such as feed and veterinary services. This means that profit margins are somewhat protected from rising input costs. These two major poultry processors process over half of all chicken meat produced and consumed in Australia, which helps to stabilise the prices poultry meat farmers receive. A circumstance not enjoyed by the egg producers. Last month, the Australian Competition and Consumer Commission (ACCC) started proceedings in the Federal Court against the Australian Egg Corporation Limited (AECL) and a number of its directors, and two egg-producing companies. The consumer watchdog alleges that the organisations attempted to convince AECL-member egg producers to cull breeding hens and dispose of eggs to reduce the supply in the market. The IBISWorld report forecasts that revenue for both the egg farming and poultry meat farming industries will grow modestly over the next five years, with poultry meat farming growing at a slightly faster pace. Profit margins for egg farmers are expected to remain low as growth in revenue is outstripped by growth in feed prices. In contrast, as poultry meat farmers become more efficient, their profit margins are forecast to increase. 82
July/August 2014
www.foodprocessing.com.au
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March 2014 total CAB audited circulation (Aust + NZ): 5847 readers (85% personally requested) Printed and bound by Bluestar Print +61 2 9748 3411 Print Post Approved PP100007395 ISSN No. 1039-8414 NOTICE: All material published in this magazine is published in good faith and every care is taken to accurately relay information provided to us. Readers are advised by the publishers to ensure that all necessary safety devices and precautions are installed and safe working procedures adopted before the use of any equipment found or purchased through the information we provide. Further, all performance criteria was provided by the representative company concerned and any dispute should be referred to them. Information indicating that products are made in Australia or New Zealand is supplied by the source company. Westwick-Farrow Pty Ltd does not quantify the amount of local content or the accuracy of the statement made by the source.