Industry growth forecast for poultry and eggs in Australia

Posted by AFN Staff Writers on 23rd June 2014
Industry growth forecast for poultry and eggs in Australia
Industry growth forecast for poultry and eggs in Australia

Revenue for both the egg farming and poultry meat farming industries is forecast to grow modestly over the next five years, with poultry meat farming growing at a slightly faster pace, according to market research organisation IBISWorld.

Last month, Australian Food News reported that the Australian Competition and Consumer Commission (ACCC) had started proceedings in the Federal Court against the Australian Egg Corporation Limited (AECL) and a number of its directors, along with two egg-producing companies. The consumer watchdog alleged 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.

IBISWorld said these allegations came at a time when egg farmers faced fluctuating input costs and low margins. Profit received by poultry meat farmers, on the other hand, was higher and more stable.

Profit margins for egg farmers are expected to remain low as growth in revenue is outstripped by growth in feed prices, according to IBISWorld. In contrast, as poultry meat farmers become more efficient, their profit margins are forecast to increase.

Egg production expected to drop

Egg production in Australia has increased over the past five years, but is expected to drop over 2013-14 due to outbreaks of avian flu at a number of farms in New South Wales.

Meanwhile, IBISWorld said egg farmers had benefited from improved public perceptions of the health benefits of eggs. Campaigns developed to turn consumers against the belief that eggs are high in cholesterol have led to higher egg consumption.

IBISWorld estimated that revenue for the egg farming industry would grow at an annualised 3.5 per cent over the five years through 2013-14, to reach $575.6 million. IBISWorld said it should be noted that this growth figure is inflated by rapid growth in 2010-11 due to a recovery in output following the global financial crisis.

Egg farmers have little control over the prices they receive, according to IBISWorld. While demand for free-range eggs had aided industry growth, a lack of legally binding standards for egg certification has caused confusion among consumers and limited the prices that free-range producers can charge. Australian Food News reported earlier in June 2014 that a national definition of ‘free range’ could be on its way, with NSW Fair Trading working towards a national labelling standard.

IBISWorld said the dominance of private-label eggs at supermarkets had also put downward pressure on the prices received by egg farmers.  As a result, profit in the egg farming industry was generally low, though it had increased over the past five years due to tightening supply.

Poultry meat brings higher profit margins

Poultry meat farmers receive higher profit margins than their egg-farming counterparts, according to IBISWorld.

The poultry meat farming industry is characterised by a large number of small farms, with the majority of industry products supplied to major poultry processors under contracts. Under the terms of these contracts, IBISWorld said processors generally paid for the majority of input costs such as feed and veterinary services. This means that profit margins are somewhat protected from rising input costs – which is not the case in the egg farming industry.

Australia’s two largest poultry processors (Inghams Enterprises and Baiada Poultry) process over half of all chicken meat produced and consumed in Australia, which IBISWorld said helped to stabilise the prices poultry meat farmers receive.