Emissions set to reduce continental egg supply

Published on : 16 Dec 2024

The headwinds against farming and food production in the UK appear to strengthen unrelentingly. The fallout from the October Budget wasn’t the start, but it’s also far from the end. As our nation continues to plough its own furrow in the world of international trade, the threat of seeing our competitiveness undermined by imported goods of inferior quality produced to a standard illegal in this country is constant. Due to take effect from 2027, the Governments proposed carbon border adjustment mechanism (CBAM) will add an anticipated £50 to £75/t tax on fertiliser and other energy-intensively manufactured commodities. If the application of manure to land were one way that farmers may mitigate the impact of this likely UK-exclusive piece of regulation, DEFRA have fired a warning shot, launching a ‘snap review’ of autumn muck-spreading and the statutory guidance used by the Environment Agency to apply the Farming Rules for Water.

Domestic regulation develops at pace and with insufficient notice to allow for strategic investment. It’s almost as though the Government does not want food production on these shores. But if we thought the UK was unique in this respect, we only need look to the Netherlands for perspective. Farmers are being paid not to produce, and with seemingly generous settlements being offered, many are taking up the option.

Initiated 5 years ago, in late 2019, the Dutch government introduced a policy aimed to protect identified nature reserves from nitrogen pollution, with agriculture and more specifically, dairy farming, in the crosshairs. Protests ensued, and arguably Dutch politics remains in a state of perma-crisis as a complex web of inter-related and contentious issues have risen to the fore, including immigration, inflation and human rights. Solve one problem, create two new ones.

Since the 1950s, Dutch farming has consolidated and intensified. The pig and poultry industries have grown substantially, and the country is a substantial net exporter to neighbouring Germany, Belgium, France and beyond. With a refined target to halve nitrogen emissions in the decade to 2030, nearly €1.5bn was put aside to buy out and shut down farms. The National Termination Scheme for Livestock Farming Locations is voluntary and requires a farm to apply for the closure compensation scheme. The compensation provides up to 120% of the capital value of the business, and in return the farmers must permanently reduce nitrogen emissions.

The government targeting around 3000 sites in and adjacent to the special nature reserves, the Natura 2000. These reserves are principally in the South East, where around 70% of the poultry industry resides. Because of the way the calculations have been created, the compensation is arguably more appealing to layer farmers than broiler growers or breeders, whose livestock values have been incorrectly equated.

At the latest count, more than 220 poultry farms have registered for the scheme, the majority of which are egg producers, and many without succession plans or the appetite to reinvest. And from 2nd December 2024, livestock farmers can also apply for a feasibility study into business relocation. This scheme is designed to offer farms located in Natura 2000 areas the opportunity to find a sustainable location elsewhere. Applications for relocation will open from 6th January 2025, and the scheme will cover the moving costs of demolition and modernised rebuilding, re-establishment and restocking as well as the professional services required to manage such a business transition.

Dutch egg trade association Anevei estimate that the laying population will reduce by 10% or between 3 and 3.5m hens, but others predict a much greater reduction. In fact, some are predicting as much as one third of the Dutch national flock will be removed in the immediate years ahead.

Belgian farmers are experiencing a similar market dynamic, albeit from a smaller starting point. Today, more than a third of the 11m layers in Belgium remain in cages. Free range and especially barn systems have grown rapidly, but rather than see the remaining legacy systems converted, the combination of heightened environmental protection measures and an aging farming population without the younger generation to follow is expected to result in closures rather than reinvestment. Many predict a 2-3m bird reduction in the Belgian flock over the next 5 years.

Sales manager at chick hatchery and rearing organisation Vepymo, Alex Janssen, has a good picture of the situation in the laying hen sector. Janssen sees a special dynamic emerging, with many poultry farms approaching a crossroads. According to Janssen, the predicted decline of 10% is on the cautious side. He would not be surprised if the laying hen population were to decline by more than 15% in the near future. The processing trade will be the most exposed. It would be expected that even if the national flock reduced by 20%, the fresh egg packers and marketeers would have sufficient supply. The processors, however, may need to turn to imports for their raw material, before re-exporting their goods.

While some farmers wrestle with the difficult decision to continue or to take the payout, others look upon a decline in numbers as a positive influence on the support for a healthy egg price in the future. “A shrinkage of the laying hen population is beneficial or those who stay,” says Bert Torsius from Putten.

A reorganisation of food supply chains is underway, with political decisions shaping where farms will operate. The changes will likely challenge the existing structure of industry, with businesses like abattoirs or feed mills finding that sites reliant on efficient, local logistics become unviable. And whilst some farm closures represent the right decision for the long term, albeit brought about abruptly, others see relatively new or modern houses being demolished as mis-aligned with the overall objective. Ironically, it is the more heavily invested farms, likely with greater efficiency or lower emissions, who see the strongest financial incentive to stop. The effect of this is to more dramatically reduce livestock numbers rather than the pollution they may contribute.