Publications on the internet
UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.
Any public use of, or reference to, the contents should make clear that neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.
Members who receive this for the purpose of correcting questions addressed by them to witnesses are asked to send corrections to the Committee Assistant.
Prospective witnesses may receive this in preparation for any written or oral evidence they may in due course give to the Committee.
Taken before the Environment, Food and Rural Affairs Committee
on Wednesday 2 March 2011
Miss Anne McIntosh (Chair)
Mrs Mary Glindon
Examination of Witnesses
Witnesses: Mark Williams, Chief Executive, and Giles Clifton, Head of Public Affairs, British Egg Industry Council, gave evidence.
Q1 Chair: Good afternoon, Mr Williams. Thank you very much for joining us in our inquiry into the Welfare of Laying Hens Directive and the implications for the UK egg industry. For the record, would you like to introduce yourself, and Mr Clifton?
Mark Williams: My name is Mark Williams, chief executive of the British Egg Industry Council. Good afternoon, ladies and gentlemen.
Giles Clifton: I am Giles Clifton, head of public affairs for the British Egg Industry Council.
Q2 Chair: You are both very welcome. Thank you. Perhaps I may ask you first a general question. How would you describe the state of the egg industry at the moment?
Mark Williams: At the present moment in sheer commercial terms the industry is going through a sticky patch, but because we are an unsupported industry we have always responded to supply and demand and met exactly what the consumer requires. Like all industries that operate under market conditions, our slight over-supply situation at the moment will correct itself in the coming months.
Q3 Chair: Would you care to comment on the cost of production as opposed to one year, three years or five years ago? How do you find the cost of production looking particularly at feed prices and also fuel costs?
Mark Williams: Both have risen significantly. How energy prices have increased, and continue to increase almost on a daily basis, is I believe well documented. For egg producers the cost of feed is a significant proportion of the overall cost of producing a dozen eggs. We have seen the price of wheat effectively double; the price of soya, which is the main protein ingredient in a laying hen’s diet, has also shot up considerably; and of course there are supply issues that are well documented from problems with harvests in different parts of the year. So the industry has been under severe pressure from increasing costs of feed and energy.
Q4 Chair: The industry has made a significant investment in enhanced cage production. Would you like to quantify what the impact of change on production costs will be?
Mark Williams: Yes. We are very proud to be part of an industry that has always taken the initiative here in the United Kingdom. Our egg producers and the other parts of the industry have made a phenomenal investment in meeting the requirements of the new laying hens welfare directive. If you look at it over the implementation period of 12 years, our industry will have invested £400 million in meeting the requirements of that directive. I believe that is the crux of the argument and why we are here today. That investment made by the UK industry must be protected from what we believe will be noncompliant production coming out of Europe in just under 12 months’ time.
Q5 Chair: At the moment how competitive do you think UK egg production is compared with production in the rest of the EU and with the rest of the world?
Mark Williams: If you look at our current rate of self-sufficiency, the UK is 80% selfsufficient in eggs. Therefore, we import 20% of our consumption needs and roughly two thirds of that will come in a shell form and tends to get sold in wholesale markets and small retail shops in big cities and food service outlets, at least some of them. The other one third of the import requirement will come in as egg products already. That is where we believe the battle ground will be as we come to the end of this year and start 2012.
Q6 Chair: What would you say are the main challenges to UK egg production at the present time?
Mark Williams: Besides what you raised, Madam Chairman, at the beginning about the increasing cost of feed and energy, the very real concern is that other parts of the European Union will not be ready, as we will be, to implement the laying hens directive in its entirety.
Q7 Neil Parish: In your evidence you suggest that some Member States may be given a last-minute extension to implementing the directive. On what do you base that assessment?
Mark Williams: We have done a considerable amount of work over the last 10 years. In 1999, in the early days when the directive was adopted, we did various economic analyses of the effects on EU production vis-à-vis third-country imports. If we leave third-country imports aside for the moment and look at what is happening just within the EU, it became abundantly clear to us in the mid-part of the last decade that all producers across the EU just would not be ready on time due to a number of factors, some within the control of producers and some certainly outwith their control.
As we look today-we believe that our figures are still relevant and are based on data from the European Commission, so they are their own statistics collected from Member States-29% of commercial laying hens in the European Union of 27 will not be compliant with the directive on 1 January next year. That is nearly one third-or, put into simple terms, 83 million eggs a day would have to be destroyed. The Commission has very clearly said-we totally support it on this point-that the directive will be implemented on time. However, on 19 January it held a stakeholder meeting of various participants: the industry, welfare groups, consumers and retailers as well as Member State representatives. I was part of that meeting. It became very clear that other options would have to be looked at. Some of those options we would support; other options we certainly would not support. But let me make it clear, Madam Chairman: as far as we are concerned we are working closely with our own Government here in the United Kingdom to make sure this directive is implemented on time.
Q8 Chair: Which other Member States are ready and which are not? Do we have that information?
Mark Williams: As things stand at the moment, in theory we are still in the implementation period. They should all be ready at the end of this year. For example, Germany went ahead of the directive and decided to ban battery or conventional cages at the beginning of last year, by the time it was phased in. Austria does not have any conventional cages any more but allows enriched cages, which are allowed under the directive, but they will phase out those eventually in 2020. Sweden went ahead and banned battery cages but started that process before they acceded to the EU in 1995, so there was a transitional arrangement.
Q9 Chair: Sweden?
Mark Williams: Sweden, yes.
Q10 Thomas Docherty: They started it in 1995 and then came into the EU?
Mark Williams: Yes. They banned battery cages in 1989 with a 10-year phase-out, and joined in 1995.
Giles Clifton: It is also true, Madam Chairman, that Poland has repeatedly gone to the Council of Ministers to ask for a three-year extension to the 1 January 2012 ban on the grounds that they simply will not be ready. At the moment the vast majority of their production is still in the conventional systems.
Q11 Neil Parish: I just wanted to add that Jim Paice has been very much part of the Council of Ministers’ opposition to any extension of the present system, so the new regulation has to come into force. But do you suspect that one of the things that will be done is that, for example, you will not be able to export eggs from Poland to the rest of the European Union out of the existing cages, but they will be able to sell their egg production in Poland? Does that worry you? Will it stay in Poland under the lower conditions or will we find it going into the rest of Europe in processed form in particular?
Mark Williams: There are two issues here. The first one is getting the policies in place. As you correctly say, the policy is basically to put in place what would effectively mean an export ban of non-compliant production if producers were either given more time or took more time from the beginning of next year to phase out battery cage production. Of course, the second phase is the detail, which is all important to my members operating out there on the farms in the United Kingdom. How do you prevent either eggs or egg products that are supposed to stay in that Member State from finding their way across the channel or through the tunnel? That is the key point. DEFRA has been hugely supportive on this point-in particular the Minister and Secretary of State in pressing Europe to ensure that the directive is implemented. But what worries me somewhat at the moment is that the Hungarian presidency at the last Council meeting on 21 February was already talking about transitional measures.
Giles Clifton: If I may come in, Mr Parish, you can see the problem. You might imagine a large farm with seven poultry houses, three of which are converted to the new enriched system and four are still using the old conventional cage system. All the eggs go to a central packing station. Overseeing that things are done properly in accordance with the directive, even if there is a phased opt-out period, would be a recipe for chaos, frankly.
Q12 Neil Parish: There is the question of how much processed food we might buy from Poland. If you were buying processed food you would have no idea of the eggs used in it, would you?
Mark Williams: Exactly. With your permission, Madam Chairman, we have brought along some props to try to illustrate the point.
Q13 Chair: You will have to describe it for the record.
Mark Williams: We will. I am holding up a six-egg pack. Therefore, fresh eggs would be sold in it. This would be sold, as it happens, in one of our named retailers in the United Kingdom. Just under half of all the eggs produced in the United Kingdom will be sold at retail level in shell. The other problem we have is that at the moment 23% of all eggs produced in the United Kingdom will be processed; in other words, they will be taken out of their shell and made into a variety of egg products. You name it, they can do it now.
The balance, which is really shell eggs again, go to the food catering sector. That sector, not exclusively but generally, is governed by price. That is a key point. So in retail, as you know yourselves, there are eggs from different production systems used and consumers make their choice. It is as simple as that. As to the food service sector, increasingly there are now moves by companies to use non-cage eggs because that is what their customers want, but today it is still very much a price-sensitive market.
We then get into the processing market. Unless the manufacturer can gain a marketing advantage from selling a product made with free-range eggs they will not do it. What they are interested in is both the price and the microbiological safety, i.e. no salmonella or other bugs in it. Animal welfare considerations come low down the chain.
If I am a consumer and go into a retailer on 2 January of next year-because of the bank holiday, of course-basically I wish to ensure that when I buy a bag of imported pasta, the egg from which it is produced is a legal product in that other European country. I know that you are to speak to the British Retail Consortium afterwards, but certainly my members are talking to their customers, who are retailers as well as food service companies and manufacturers, to make sure that they are buying legal product from the beginning of next year. While the vast majority of those people will be responsible, there will be those who perhaps are not in membership of that organisation or others who may just decide to buy on price, and then we have leakage straight away.
I cannot stress enough the collateral damage that will be done to our industry from illegal product coming on to our shores from the beginning of next year unless measures are put in place. The two measures we clearly set out in our submission to you, Madam Chairman, are: that basically the directive should be enforced to the letter, and that if more time is given or taken by producers in certain other Member States then that production must stay within their own borders.
One particular point that I see in black and white, but I am afraid the European Commission does not, is that we allow our enforcement authorities in this country, Animal Health and the Egg Marketing Inspectorate, to put a different number on the shell of those eggs coming in. To me, it is simple. It then makes it clear that an egg which carries a No. 3 code on the eggshell comes from a legal, enriched cage egg. Any egg that comes across our borders but is not supposed to must carry another mark, a skull and crossbones or whatever. It does not matter, as long as it does not carry a No. 3. That is really what we are pushing for. DEFRA is supporting that but the Commission is not listening at the moment.
Q14 Chair: Did you say you would not know until the end of the year which Member States are not in a position to comply?
Mark Williams: We know there are certain Member States that physically cannot comply now from the very fact that equipment must be ordered; erection gangs must be contracted; and then physical erection has to take place. I could name the Member States but prefer not to, but, if I generalise, the northern European Member States in general will be ready and the southern and eastern countries will struggle. It is not all producers, because a lot of them in those countries will be ready, but the whole of their industry will not be ready-hence Poland, Romania and Bulgaria went to the Agriculture Council just over a week ago to ask for more time.
Q15 George Eustice: I just want to probe this. You said in your opening remarks that there were factors within their control and others outside it that meant they were not ready to comply. Can you explain a bit more what these are? You talked about lack of time to order, but are we just talking about the fact that they have different attitudes to animal welfare and so do not care, or is lack of financial capital a barrier to compliance? Why is it that Germany complied very easily ahead of time and these other countries are struggling?
Mark Williams: In certain European countries the actual percentage of cage production is above 90%, so consumers in those particular Member States do not really place animal welfare considerations high up on their agenda. For example, by the beginning of next year free range will be 50% of all eggs produced in this country. In the Member State I am referring to, at the moment 95% of all eggs are produced in a cage system. To change that industry to enriched or non-cage will take longer than the deadline that has been given to them. You mentioned the financial crisis. In the same Member State normally they would receive Government assistance to oil the change. Because the financial crisis has hit this particular Member State very hard indeed, Government has pulled back from providing that grant aid.
Giles Clifton: It is also true, Mr Eustice, that the Commission itself has not helped matters in some ways because when it initially brought in the directive it said it would give a more definitive final say on this by 1 January 2005. It did not produce that final definitive viewpoint until 8 January 2008, which meant that producers in the UK, for example, did not then have the green light that this would most certainly happen on the date it was meant to, so that did not help matters.
Q16 George Eustice: So are there other factors? The No. 1 factor is the basic lack of financial capital.
Mark Williams: I would say market demand is No. 1. There has not been the willingness to do so. Why on earth would I invest in an enriched cage system in this particular Member State when the cost of production is 8% higher? I have my competitors down the road who will probably carry on using a traditional battery cage. Straight away I am making myself uncompetitive. Therefore, you leave it and leave it and then the financial crisis comes along to compound an already difficult situation.
Q17 George Eustice: Basically, you are saying it is a judgment call that the authorities would not enforce it. This is not like going to free range where you try to get a premium for your product; this is a new legal requirement, and you are saying they are actively just ignoring it.
Mark Williams: One of our legitimate fears is that at the moment the Commission points towards current enforcement measures. The current enforcement measurement it uses is missions from the Food and Veterinary Office to check that Member States are complying with and enforcing EU legislation. I refer you to an FVO mission to Poland at the beginning of last year that picked up non-conformity on the current stocking density in cages. The individual producer was fined in the order of €7,500. This particular business has 1.25 million hens. I would say that is not satisfactory. That fine would be classed as a business expense, so what is the incentive to do anything about it? There isn’t one.
Q18 Neil Parish: Taking that particular Member State, do you have any idea how many have converted to the enriched cage? Eventually there will be pressure within that Member State because those who have made the investment in the higher standard cages and have extra costs will want to stop the rest of their fellow farmers producing eggs according to lower standards? Do you have any ideas on that?
Mark Williams: I can refer you, Mr Parish, to the stakeholder meeting on 19 January. The representative from the Government of Poland noted that there were 452 production units in Poland using conventional cages. She said that 131 had enriched cages, but I believe she meant to say "enrichable cages". What it means is that it is still a conventional cage in which you would put the furniture of a nest box, perches and scratching area from the beginning of next year. But she clearly said that a phenomenal percentage of their hens would not be legal from the beginning of next year, hence their return to the Agriculture Council last week to ask for more time.
Q19 Neil Parish: Therefore, there will not be much pressure within Poland at the moment.
Mark Williams: There was also reference to lack of enforcement ability at the moment in Poland.
Q20 Amber Rudd: Do you think that it is small and local producers who might suffer most under this directive in terms of the costs of adapting and being commercial going forward?
Mark Williams: To be honest, I do not think any distinction could be drawn between large, medium or small. At the end of the day, the large producers in this country have spent many millions of pounds. To move from a conventional cage to an enriched cage costs £25 per hen. If that is something which your counterpart on the continent does not have to do, it is a significant cost. Therefore, I do not draw any differentiation between sizes.
Q21 Amber Rudd: What about employment issues? Do you think it will affect employment in the industry?
Mark Williams: My personal view is that if we do not get this right, it will. Ladies and gentlemen, you will know better than I do what happened to the UK pig industry a few years ago. One thing we want to avoid collectively is for our successful UK egg industry to go along similar lines.
Q22 Amber Rudd: Have you made any assessment of what effect implementation of the current directive might have in terms of employment?
Mark Williams: In round figures, currently, 10,000 people are employed directly in the industry, and another 13,000 are employed in ancillary industries like feed, veterinary and equipment, which we share with the poultry meat industry, if you like. Quite simply, if you are putting up your production cost by 8%, bearing in mind that price is the governing factor in the particular segments of the market I described earlier, there is no doubt that the impact will be severe.
Q23 Chair: You said that feed and energy costs were challenging. Is that the same across the piece? Do you have energy costs in terms of both heating the units and transporting?
Mark Williams: In terms of energy, the cost of oil will have gone up and affected the price of feed deliveries and the price of manufacturing feed as well. Energy costs have gone up-electricity for running feed mills and so on. We have heating costs because a day-old chick must have heat, which you gradually decrease over the first few weeks of its life until it can produce its own heat to keep it at ambient temperature. These are all costs that the industry has to bear.
In addition, other input costs are going up. For example, vaccine costs are going up significantly. There are issues about availability of supply, all of which must be addressed as we go forward. I would hesitate to use the expression "perfect storm", but at the moment it seems to us there are quite a few clouds gathering. We would wish to get out of the storm rather than allow it to hit us full on.
Q24 Chair: You just referred to the parallel of the pig industry, but there we were in the German position of going ahead unilaterally, well ahead of our competitor countries.
Mark Williams: Yes.
Q25 Chair: Are you getting support from Germany and their position on their producers as well?
Mark Williams: Absolutely. The German Government representatives supported Caroline Spelman when she made her statement in the council rejecting the Poles’, Bulgarians’ and Romanians’ wish for more time, so we were very happy about that.
Q26 Chair: So, you have named the countries.
Mark Williams: We are very happy about that.
Q27 Dan Rogerson: For the record, you have explored a little the trend in what consumers demand here and what retailers provide. Can you set out what evidence there is that consumers are prepared to differentiate between production methods in terms of the choices they make?
Mark Williams: I take you back to 2004 or 2005-I cannot remember which-and the European egg marketing regulations. So they are egg-marketing regulations that are directly applicable. They were amended. They required that every single class A egg produced had to have a code put on it. The code on the egg started with a zero if it was an organic egg; it was one if it was free range; two if it was a barn or three if it was a cage. Then you had the country of origin, in our case "UK", or "NL" for the Netherlands, and so on; and then a unique code after it saying that it came from my farm, for example. That very clearly allowed consumers to see which egg was produced from which system of production. Led by both industry as well as particular retailers, they were already asking for clear labelling on the pack.
Our industry has always been totally transparent. We believe in transparency, and when you are market led you must be. As we saw back in 1999, about 75% of all eggs produced in this country at that time came from a cage system. Today, about 50% of eggs come from a noncage system, and all of that is done by market demand and by being honest and open with consumers.
Madam Chairman, with your permission I should also bring in that my organisation runs the Lion quality scheme for eggs. That is basically a food safety scheme to ensure that eggs are as safe as possible for consumers. Some 90% of all eggs produced in the UK come under those standards. We took the decision many, many years ago to prohibit the use of misleading terms on packs. Therefore, on a cage pack we do not use the term "farm fresh eggs"; we call them "fresh eggs". There can be no pretty pictures of farmyard or countryside scenes on a cage pack, so when consumers go into a shop they can see very clearly what eggs they are buying. It is their choice, and I believe that is the way it should be.
Q28 Dan Rogerson: Some have argued that in addition to the system that is used, how birds are looked after obviously can have a crucial effect on welfare. Is the industry doing much in terms of training about how to get the best out of the systems that are there to increase standards?
Mark Williams: Yes, absolutely. Within the Lion code there are higher standards of animal welfare than those prescribed by either UK or EU legislation. You are probably aware that Freedom Food runs a scheme for non-cage eggs, and our colleagues from RSPCA will touch on that. We mirror the Freedom Food welfare standards for our non-cage production, so you can see we already have higher standards of welfare. Producers are audited independently to make sure they are trained in bird welfare. We have the DEFRA code and the same codes in the devolved Administrations. The codes of practice for welfare must be available and understood by farm staff. I certainly would not put someone in charge of £1 million, £2 million or £3 million-worth of stock without making sure they knew what they were doing, if you know what I mean. It is so critical. The margins in our industry are so wafer thin that you cannot afford to get it wrong.
Q29 Chair: For clarification, in the memorandum you have submitted you say that free range eggs currently account for 41.7%.
Mark Williams: Yes.
Q30 Chair: You forecast that free range production will go up to 50% by 2012.
Mark Williams: Yes.
Q31 Chair: Are you confident that will be reached?
Mark Williams: Looking at figures supplied by people like TNS and others, certainly retail sales of free range eggs are still going up. Perhaps they are not going up at quite the extortionate rate they were now we are in recession, but it is certainly true that free range eggs are continuing. It is a forecast and we believe it is still relatively accurate.
Q32 George Eustice: You said at the start that you were proud to be implementing this new directive, but, to play devil’s advocate, is it that much better for a bird that it has 50% more space and a perch? If you are a chicken do you feel much, much better in that type of cage, or is it still a million miles from barn eggs and even further from free range? I have heard some producers defend cages as better for animal welfare than barns, for instance. I find that counter-intuitive, but I wondered whether you had a view on it.
Mark Williams: The welfare directive prescribes what an enriched cage should provide. A current battery cage provides 550 square centimetres a hen; an enriched cage provides 750, plus the provision of a nest box, scratching area and perching space. In the UK certain companies have led the design and development of this. We now use what we call enriched colony cages. For example, instead of having traditional battery cages-I am sorry; I struggle to describe it for the person who has to write it down-we put in big colony cages, which effectively are a series of cages where the hens have open access throughout.
What we are seeing now is that mortality levels are even lower than for a battery cage, which were already very low; the feather cover is better; the bird behaviour is better. It is not just industry saying that; it has been scientifically proven by research done under a LayWel project funded by the European Union on an EU-wide basis that concurs with that.
Q33 George Eustice: With colony cages there is free movement, which enables them to behave more normally, but to comply with the directive do people have to have colony cages, or can they just have a slightly bigger old-style cage?
Mark Williams: You are quite right, Mr Eustice. They can have just a slightly bigger furnished cage, but here in the United Kingdom as far as we are aware all the cages that have been installed are colonies. In the early days of the directive we moved towards, say, 40bird colonies, then to 60 and the majority of the units going in currently are 80-bird colonies. We are seeing fantastic results. It is important to note that there are not just welfare benefits; there are also economic benefits for the producers. While the cost of production has gone up by 8%, we have now overcome the problems of second-quality eggs that we saw in the early days, where 90% of eggs being laid in a nest box knocked into one another causing hairline cracks, which are not acceptable at retail. Therefore, we have overcome those problems.
Q34 George Eustice: How far away from a barn system is a colony as you describe it in terms of, say, life expectancy of the bird?
Mark Williams: Barn and free range systems inside a house are exactly the same. The difference between the two is that free range hens have access to a range area outside. A barn system has a stocking density of nine birds per square metre, as per the welfare directive. Obviously, Freedom Food/Lion have higher standards in terms of access by hens to the outside. We have bigger pop holes so they can get out more easily. We enrich the range outside to encourage hens outside, all for their welfare benefit.
Q35 George Eustice: Is there a big difference between the two systems in terms of life expectancy of the hens?
Mark Williams: No. Basically, a laying hen is reared to point of lay and is then transferred to its laying quarters from its rearing quarters, and it will stay in lay for about 13 months. The traditional cycle is 72 to 76 weeks of age, when it is slaughtered.
Q36 George Eustice: The "colony" point is really interesting. How many of the other European countries will take the colony system route, which seems to me almost more significant than the arbitrary and slight increase in space?
Mark Williams: We do not have any cage manufacturers in the UK any more; they are European-based, and the work that is being done-I dare to say it is led here in the UK-will effectively be implemented by other European countries. The problem is that, as we said earlier, a lot of them are well behind at the moment.
Q37 George Eustice: So, if they renew their system they are likely to end up with a colony system?
Mark Williams: Yes.
Q38 Mrs Glindon: I would just like to ask about the potential quality of the eggs in the worst-case scenario if these other European countries were allowed a time delay and were able to undercut the British market. I want to ask about the quality of the eggs. Obviously, the egg has a best before date. So there must be some implication if eggs are being imported that that would be reduced by the time it gets to the consumer in whatever form. If that is the case, are there also any implications for health and well-being in relation to the consumer? Am I clear in what I have said?
Mark Williams: Totally clear. Because we have European egg marketing regulations that are directly applicable, that sets a best before date on an egg. So when you go into a shop to buy an egg it has to be taken off the shelf at 21 days from lay because that is the so-called sell by date. The EU best before date is set at 28 days. Within the Lion scheme we set a shorter date because it is a quality scheme. So if you are talking about quality, in theory all eggs produced throughout the European Union should be exactly the same; it is a simple as that.
If you are talking about safety, that could be a slightly different issue. In the United Kingdom we have done a fantastic job, and full marks to the industry. We had our problems with salmonella in December 1988 and during the early part of the 1990s. Those days have long gone. We are a chalk and cheese industry compared with then. You have only to look at the success of the Lion scheme in effectively eradicating salmonella from UK eggs. That is backed up by our Government’s figures and European survey figures, which improve year on year. The industry should really be congratulated on that.
That has not always been the case with all 27 Member States. A survey done a few years ago by the European Commission showed that there were a number of Member States that had a problem. They are sorting out their problem, but they have not achieved what we have achieved here in the United Kingdom. I think your final question was: would it take longer for eggs to be imported from the continent? There is a time factor, but because the best before dates are so long, in many ways, commercially it would not provide protection to say that British eggs are fresher than eggs that have to come across the channel.
Q39 Mrs Glindon: But it is not ideal. Probably being able to get them more locally, being based in this country with all of the protection around them, means the ideal would be if they were British eggs.
Giles Clifton: It is certainly what the consumer wants as well.
Mark Williams: That is right. We have something like 88% consumer recognition of the Lion mark. You only have to look around the retail sector, and increasingly the food service sector, to see the number of packs now sold with the Lion mark on the box. It has been a phenomenal success story. The problem is that with every success story there is always a risk that you can have problems going forward, and through no fault of our own we can see real problems arising potentially from the beginning of next year.
Q40 Thomas Docherty: Good afternoon. It is good to see you again, Mr Clifton.
Giles Clifton: The same to you.
Q41 Thomas Docherty: We have had evidence about some egg producers choosing to leave the industry as a result of the transition costs. I think it would be helpful to the Committee to get a sense from you as to how widespread a factor that is.
Mark Williams: The Lion scheme represents 90% of UK egg production. I suggest that the vast majority of the 10% that is non-Lion will be egg production that is still in a battery cage or is changing to colony cages. The reason I bring in the 90:10 figure is that the people who are part of the Lion scheme have agreed collectively that regardless of what any legislation says, on a commercial basis there will be no Lion factory cage eggs sold from the beginning of next year; in other words, it will be policed rigorously.
The people who are not part of the Lion scheme do not come under the control of our auditing system. Many of those people in the submissions that you have received have expressed severe concern because of lack of finance and so on, and will leave the industry. I am hearing that others are now starting to invest. Some will be ready on time. I hope all will be ready on time here in the United Kingdom. That is certainly the plan, and DEFRA and Animal Health in their enforcement arrangements will be making sure that they do comply. I hope that answers your question.
Q42 Thomas Docherty: What percentage is leaving the industry, if you had to take a stab at it? I appreciate that it is difficult.
Mark Williams: It is difficult to say. Because you are providing hens with more space, if you use existing housing you will get fewer hens in the new enriched cages, quite simply. Therefore, producers who want to stay in the business and keep their hen numbers at the same level will have to expand production. A lot of producers have severe problems in getting planning permission to build new houses. Nimbyism is rife, so to speak, in many respects. That has caused problems. There is no doubt that it has delayed things, but it is difficult to put a figure on it, and I would be wrong to guess.
Q43 Thomas Docherty: My understanding is that at least one nation of the UK is providing financial assistance to its egg producers. Scottish Ministers provide it through rural development grants and financial assistance to Scottish egg producers to make the transition. I am not clear if it is buying the cages or expanding their areas. Do you think this difference in approach between Scotland and the rest of the United Kingdom has distorted the market within the UK?
Mark Williams: Madam Chairman started by asking whether there were any problems with our industry at the moment. We are suffering from over-production. I believe that one factor that has added to that has been the provision of grants in certain parts of the country. The devolved Administration to which you refer, Mr Docherty, has also made those grant aids available to go into non-cage or free range production.
Q44 Thomas Docherty: Has not? Oh, it has-right.
Mark Williams: It has been made available to producers to get into free range production; it was not just kept to that. What do I think of grants? Not a lot, to be perfectly honest, because I think they distort markets. You just leave the market to get on with it, as long as everybody plays by the same rule book.
Q45 Thomas Docherty: Are you aware of any discussions between DEFRA and Scottish Ministers as to the impact that the different approach has had on the market?
Mark Williams: I think you would need to ask DEFRA that question, because I would have thought that is a discussion between the devolved Administration and the Government.
Q46 Thomas Docherty: Have you asked DEFRA through your public affairs arm, or through your own discussions, to raise the issue with Scottish Ministers?
Mark Williams: We have not directly, but the provision of grant aid will have been mentioned in conversations. For example, when we have made submissions to DEFRA over the past 10 years we have asked for funding under rural development for, I suppose, UK producers, but then some of the devolved Administrations went ahead and provided grant aid; however, in England it has always been refused.
Q47 Chair: How would you describe the current enforcement regime?
Mark Williams: Here in the United Kingdom or on a Europe-wide basis?
Q48 Chair: Both.
Mark Williams: If I may talk first about Europe, Madam Chairman, it has considerable room for improvement. I quoted the example of the FVO mission in Poland in 2010. One of the points made at the stakeholder meeting, not by me but by the representative from the Food and Veterinary Office in Dublin, was to the effect that they need to have more teeth to ensure enforcement takes place that is proportionate to the misdemeanour, so to speak. I have no doubt at all that these other producers in European countries who are looking for more time will eventually comply, but they will not comply on 1 January next year. Some are looking for two laying flocks; some are looking to 2018, or, if the truth be known, probably even longer than that, and the concern is the damage they can cause to our industry in the intervening period.
Q49 Chair: You rather trustingly said that they should put "No. 3" on the egg, or that they must not have that number on it. Which was it?
Mark Williams: It must have "No. 3" on the egg for it to be legally sold from the beginning of January next year.
Q50 Chair: Who would have responsibility for ensuring that they complied, and had the right to have "No. 3" on the egg?
Mark Williams: As it comes under the egg marketing regulations it would be Animal Health and the Egg Marketing Inspectorate in this country.
Q51 Chair: So, they would be taking on trust what the exporting country was saying.
Mark Williams: Quite, yes. I was talking about the policy and detail. If we get on to the detail, as Giles mentioned earlier our great fear, taking a producer who has part-converted-to be clear, there are many in Europe who are part-converted-is how to ensure that we do not receive non-compliant eggs or egg products. That is where the difficulty arises. We are discussing with DEFRA ways and means of preventing that happening. To be perfectly honest, I do not see demonstrations at ports helping.
Q52 Chair: It is the same with poultry from Brazil, is it not?
Giles Clifton: Anything that is actually imported from another country in the EU is assumed to be produced according to our standards, so it is never checked. Everything else is checked on a speculative basis.
Q53 Chair: But they could put on "No. 3" without knowing.
Mark Williams: It would be illegal to do so.
Q54 Chair: If they are taking it on trust, how do they know?
Mark Williams: One of the animal welfare groups, for example, in their submission to you said that they saw no need for a different production number. They argue that it would suffice if the egg marketing regulations say that from the beginning of January next year no battery cage-produced egg can carry a "No. 3", so it sorts the problem out straight away. I would suggest, however, that to many producers in other countries, to have a product legal at five minutes to midnight on 31 December and illegal five minutes after midnight is hard to get their heads around. I talked about 83 million eggs a day, or 29% of EU egg production, not being compliant. It would be totally naïve to assume that those eggs or egg products would not enter the marketplace from the beginning of January. Of course they will.
Giles Clifton: When you consider that in Spain there is 20% unemployment-it is 40% in some Spanish regions-the idea that the Government will come along and put anyone out of business, and that the directive will be fully in force on 1 January 2012, is just wishful thinking.
Q55 Chair: Assuming that the directive comes into force, do you expect the inspection regime to be more onerous or expensive than the current one?
Mark Williams: I would certainly hope that DEFRA-Animal Health will provide sufficient resource to ensure that the directive is implemented properly; and that will, according to all our beliefs and the increasing noises coming out of Europe, ensure that no illegal eggs or egg products are allowed to cross Member State borders. I should also add for the record that we are not against the import of legal product. So if an egg or egg product has been produced from a barn, free range, enriched cage or organic system, that is absolutely fine-that is commercial competition-but we cannot have illegal product coming into this country.
Q56 Chair: But are we assuming that they will be just as rigorous in other EU countries in ensuring that they are legal at the point they leave the country to cross into another Member State?
Mark Williams: I think that is the big problem. As we are in a financial crisis with official resource being scaled back for inspection, for example, it compounds an already difficult situation.
Q57 Neil Parish: I want to take further this line of questioning. Basically, will the countries that cannot comply by next January have all their poultry farms registered? Will they know where they are? Are they going to know whether they are partly converted or partly not? Do you have any ideas about that?
Mark Williams: The honest answer is that I do not believe that is the case in a lot of other countries, for a variety of reasons, and different attitudes by Governments towards their agricultural industries is just one of them. Every Member State authority should know where every single commercial egg production unit is, because they are required to register for the producer code that goes on eggs, so it is on record already. The problem we see at the moment-it frustrates me greatly-is that when I presented at the stakeholder meeting in January I used data from May 2010 provided by DG AGRI. I know that DG SANCO, where the welfare dossier sits under their control, had asked all chief veterinary officers in Member States for details of their national plan to implement the directive, plus an update of which hens were in which system-in other words, the state of implementation.
Those figures were not put on the table at the meeting, and the cynic in me would question why. I have no evidence to support it, but I suggest it is because they were too close to the industry forecast-i.e. 29% of illegal hens from the beginning of next year-and I would have thought it would have been an embarrassment. Mr Parish, we have pressed the Commission. They invited us to write to them and request those figures. Because of confidentiality, they then have to go to Member States to ask their permission to release them. We did that, but we are being stalled at the moment in receiving those figures.
Giles Clifton: If I may just add to that, Mr Parish, the European Parliament overwhelmingly passed a resolution in December-by 459 votes to 32, with only 17 abstentions-requesting that the Commission submit by no later than 31 December of this year a list of egg product processors and retailers who would not be compliant with the provisions of the directive.
Q58 Neil Parish: In broad terms, it is bad that 29% will not be compliant, but one would have thought that the fact that 71% should be means there would be a bigger amount of political pressure on the countries to get the rest of them to comply, so the 71% are not disadvantaged. I know it is country by country, whereas the 71% is the overall EU figure, so it is very much targeting those countries, but surely there will be pressure in lots of Member States for compliance, not just in Britain.
Giles Clifton: Yes, absolutely. If you look at Germany, which went ahead and did this two years before everyone else, they are absolutely on side, as it were, as is a host of other countries. It is certainly the case that the UK has very strong allies in sticking to a firm line in enforcing this directive and making sure that our producers who have put in all this money and investment are treated fairly.
Mark Williams: This ought to be mentioned now: please do not compare the German situation with the UK situation directly. Germany is the world’s largest importer of eggs. It is a seriously big importer. Most of their imports come from Holland, so the two industries are really very closely associated. Germany was 70%-plus self-sufficient. Then they introduced the battery cage ban ahead of time. Their self-sufficiency went down, as you would expect, because cheap imports were coming in, but the German industry did a very clever thing. They worked with their retailers to ensure that the only eggs sold in German retailers were noncage, so they protected themselves, if you like. But the situation we have in the United Kingdom-"problem" is probably the wrong word-is that we produce eggs out of all systems. You have seen our forecast: 50% of eggs will be free range; 43% will be enriched cage-produced; 4% will be barn-produced; and 3% will be organic at the beginning of next year. Enriched-cage eggs will still be a significant sector, and that takes into account those consumers who are very price sensitive, and it is really offering the consumer choice. This is where we started from. I just thought it was important to ensure that the German situation is not comparable.
Q59 Neil Parish: The next question you have more or less answered, namely the two actions in particular that you require. One is a ban on non-compliant eggs, and the other is, I take it, to have a "No. 4" stamped on those eggs as well. Is there anything else you want to add?
Chair: Could we wrap up two questions as well from Mr Eustice and Mr Docherty? Perhaps you could then answer them all together.
Q60 George Eustice: You have partly answered my point in what you said about Germany. You said that their self-sufficiency went down. By how much did it go down? What impact did it have on their overall production levels? That is a good case study in a way because they have gone unilaterally ahead of the rest of Europe on this.
Q61 Thomas Docherty: My understanding is that you cannot move a hen out of a conventional battery into a new cage. My understanding is that if it is a 73-week cycle of life, surely they have to be in now and that is the clearest market. If you have hens continuing to go into battery cages at the moment, that says that farmers either here or overseas will miss the target.
Chair: Perhaps you would like to answer all those questions together.
Mark Williams: If we may we will take them in reverse order. DEFRA has clearly said here in England-it was reiterated by the devolved Administrations-that the directive would be implemented to the letter here in the United Kingdom, so if I as an egg producer wanted to get a full flock cycle through, the last date I could house a hen in a conventional cage would have been December last year; so, the 13 months in lay. That is very clear. Therefore, if people are putting hens in conventional cages today across Europe, I would suggest that they are taking a brave step and assuming they will get the return on that pullet before 31 December, or they intend to run them beyond. I suggest that the latter is probably more in tune with that.
Q62 Thomas Docherty: Is that happening?
Mark Williams: Anecdotal evidence would suggest it is, yes. There is also the issue about the way certain Governments interpret 1 January 2012. Some people may say that it is pullets housed from the beginning of the year, so straight away they get a 13-month advantage. To answer the question about self-sufficiency, I believe it is roughly 10%. I can provide you with the exact figure afterwards. Because the German market is different from many others, in that it is such a large importing country, it rather distorts the facts, but that is what all the figures point to. There would be a massive decrease in self-sufficiency. I am sorry; I cannot remember your question, Mr Parish.
Q63 Neil Parish: It is really about reinforcing the measures that you want to see.
Mark Williams: It is very simple. We want to see full implementation of the directive here in the United Kingdom and across the European Union. However, we realise that there will be problems with some producers in other Member States. I have already talked about the figure of 83 million eggs a day. Our view is that those eggs will continue to enter the marketplace illegally, or, even if the Commission and Member States allowed more time at the last moment, those eggs or egg products should stay within those Member States. It must be; otherwise, the investment of UK producers has all been for nothing. It is not just UK producers but UK consumers who will suffer that disbenefit. We then need to give the enforcement authorities some means of differentiating.
Chair: You have been very generous. We have overshot your time, but thank you very much indeed for your evidence this afternoon.
Examination of Witnesses
Witnesses: David Bowles, Director of Communications, and Alice Clark, Senior Scientific Officer, Farm Animals Department, Royal Society for the Prevention of Cruelty to Animals (RSPCA), gave evidence.
Q64 Chair: Good afternoon. Thank you very much indeed for joining us. Mr Bowles and Ms Clark, would you like to introduce yourselves for the record, please?
David Bowles: Thank you very much. My name is David Bowles. I am the director of communications at the RSPCA, and on my left is Alice Clark, a senior scientific officer at the RSPCA in the farm animals scientific department. She is our laying hen expert.
Q65 Chair: You are both very welcome. If I may ask a general question at the beginning, successive Governments have taken a number of animal welfare measures in a variety of sectors and, perversely, the consumer goes out and purchases on price. How do you feel that we are progressing animal welfare in this country when we are damaging our own producers and just boosting imports?
David Bowles: The laying hen and egg issue is a good example of where that is not happening. If you look at where we started off in 1999, 25% of the market was free range eggs. Here we are in 2011, when that has increased by 2% to 3% each year, and we are now at, as BEIC has said, probably 45% to 50% of the market. That has happened because consumers are not choosing on price-because there is still a price differential between battery, barn and free range eggs-but on welfare grounds. The egg is the clearest example where you have seen the shortening of the tie between what consumers say in an opinion poll and what they actually do when they get into the supermarket.
Q66 Chair: Do you believe that will still be the case if the EU directive comes into force and 29% of EU eggs were not compliant?
David Bowles: What the RSPCA has been extremely consistent about all the way along from 1999, when the ban was agreed, is that we have said to consumers that they need to play their part in this. They can play their part by choosing free range or barn eggs, and certainly by buying Lion eggs. We still say that. That is really important. The people who will determine whether this ban comes into effect-we have already heard from the previous witnesses that there are clear challenges with enforcement and change-over-and can play their part in ensuring that that is as smooth as possible are the retailers, the processors and consumers.
Q67 Chair: In your memorandum you say that England-I am sure you mean the UK-has several advantages in ensuring that no illegal dried and liquid eggs enter the market. Are you equally confident that such imports are not passing around the rest of Europe?
David Bowles: No, but there are eggs coming in particularly for the egg processing market. That is a problem. In terms of shell eggs I think we have a situation now in the UK where we will be fairly compliant with shell eggs being legal and in accordance with the directive come 1 January 2012. The issue and the challenge will be in the processed and the egg products markets. We have all accepted that; indeed, the RSPCA was clear that that would be the challenge way back in 1999. It is still a challenge. If you look at the Commission’s latest data, there are egg products coming from the USA, Argentina and India. All of those places are using cages. The USA is probably 95% cages; India is probably 90%. Therefore, there are real challenges, because they could undercut European producers. The key area, therefore, to focus on is the consumer but, as we know, when you are looking at egg products transparency is much more difficult because you cannot label them, but in addition the key people are the processors who buy these products.
Q68 Thomas Docherty: What activities are either you or your sister organisations-I am thinking particularly of, say, Spain-undertaking to encourage or ensure the compliance of these other countries with the directive?
David Bowles: We work through the Eurogroup for Animal Welfare, which has representatives in each of the 27 EU Member States. I have to say that the strength of the organisation varies between those states-from the UK where the RSPCA is a £110 million organisation, down to Greece where you have a couple of people and a typewriter, so it is a very different situation in those countries. But from day one when the directive was passed we clearly said to each of those organisations that they needed to go out and lobby their retailers and make clear to consumers that a changeover was to happen and they should be shifting in terms of their consumer-buying patterns. What has happened in the 12-year period from 1999 to now is that you start to see that change take place. In Italy, even in Spain, and in Greece you see companies changing over to being cage free, not just with retailers. For instance, the Netherlands went cage free in retailers long before the UK. The UK still has not gone cage free with all retailers. So a number of countries have gone further than the UK.
Q69 Thomas Docherty: Does the directive meet your concerns about cage production?
Alice Clark: We can say that it is definitely a step forward. We would hate to see that not being enforced across Europe, and that all the efforts the UK industry has put into it are undermined. It is not to the extent that we would like to see it, but I reiterate that it is certainly a step forward.
Q70 Thomas Docherty: Is there a form of cage production that you would support?
Alice Clark: Any kind of production that we would support would have to meet the full needs of the birds. As it stands, there is no evidence that a cage system can meet the full behavioural and physical needs of the birds. One thing highlighted in a Commission report a couple of years ago was that the enriched cage still did not allow for the full repertoire of the birds. Particularly when you are looking at foraging and dust bathing, those kinds of behaviours cannot be fully carried out in a cage situation.
Q71 Thomas Docherty: Given the cost to the producer of moving to completely free range, and also the cost to the consumer that I imagine is passed on, how feasible is it that we can move to an EU-wide completely free range system any time soon?
Alice Clark: Free range might be difficult, but you have to remember that there are higher welfare systems in terms of keeping them indoors in barns where they do not have outside access but still have the facilities inside, as they would have in a free range house, which allows them access to litter so they can dust bathe, forage and perch. They have free movements around the shed to exercise and move away from each other. That should certainly be a consideration in terms of farmers deciding to which system to change. Economic work that we did in 2006 looked at the costs to producers who had conventional barren cages and had to make the decision of which system to go to. The costs are quite comparable when you look at changing to an enriched cage system and some versions of the barn system.
Q72 George Eustice: I just want to press you on the point about how big a step forward this is. To come back to a question I asked earlier, how much better does a chicken feel being in an A4 plus 50% space, compared with the current system?
Alice Clark: It is fabulous to have that kind of Europe-wide recognition that the barren cage is not good enough, and there are inherent problems with the cage. You are just not in a situation where you will meet those needs at all. What we have now is a cage that is a little better. It gives a little more space; it tries to provide for those different behaviours like the addition of perching, but it is still not a situation where you can compare it with the alternative systems.
Q73 George Eustice: What do you say about the new colony system where birds can fly around and move more freely?
Alice Clark: As I have seen with the enriched cages, they still meet the requirements as set out in the directive, but from experience I think they have started to use them for larger groups of birds. They are still to the letter of the directive, as I understand it, but typically they will use 60 to 80 birds as Mark Williams said.
David Bowles: The directive is important for two things. Alice has covered welfare. Do not forget that the directive was implemented on the back of scientific reports from the Scientific Veterinary Committee, and there was a further report from EFSA in 2004, so the science is very clear. But from a totemic animal welfare point of view this is really the first time that we are moving from what can be termed an intensive production system to a less intensive one. As a totemic issue it is reversing what has happened in European farming over the last 40 years, so from that perspective it is very important not just for laying hens but farming in general.
Q74 Richard Drax: The Professor of Animal Welfare at the University of Bristol, Professor C. Nicol, said that good management may be more important for welfare than systems. That is her view. Do you think UK producers are sufficiently aware of and have knowledge of the impact of welfare systems on chickens?
Alice Clark: The impact in terms of management?
Q75 Richard Drax: Are they aware of the impact of management systems on the chickens?
Alice Clark: Management is absolutely critical. A free range unit will not necessarily be a good one if it is not managed well. The change in the legislation is based on the fact that some production systems inherently will not be good for the birds. Within the Freedom Food schemes run by the RSPCA, the standards we have developed go above and beyond the basic minimum in the legislation and cover management in detail, so it is something we would recommend all farmers start thinking about more. Certainly, in all sectors of agricultural livestock veterinary health planning is becoming more widely used within the farming industry, looking at management and training, as Mark talked about before.
Q76 Amber Rudd: Mr Bowles, you talked earlier about your conviction that consumers take account of animal welfare when buying eggs. To what extent do you think that might continue to be effective in terms of consumers buying egg products?
David Bowles: In that respect you have a major problem with egg products, in that it is much more difficult to be transparent about the information. It is very difficult to label ice cream or, even further away from that, to label what goes into wine, for instance, which is sometimes made from egg products. You have to get across that transparency boundary and that is where retailers, processors or producers, particularly in the food industry sector, are so important. For instance, when Hellmann’s Mayonnaise made the decision a couple of years ago to move to 100% free range eggs that was a really important decision because they made the choice for the consumers. When you go into your supermarket and buy Hellmann’s Mayonnaise, I imagine most people do not know they are buying free range eggs; they are buying Hellmann’s Mayonnaise as a brand, but the decision has been taken for them by the company, Unilever in this respect. When Unilever went over to free range in all their Western European products it was a really important decision because it pulled through a lot of producers.
Q77 Amber Rudd: That is very interesting. How do we convince customers that there is recognisable value in food produced to higher welfare standards not only in the UK but throughout the EU? Obviously, some recognise that but what else can we do to increase that reach?
David Bowles: I think we have been very successful with eggs in particular. Eggs are the easiest thing. I think the reason we have been so successful in convincing consumers to go for free range or systems other than cage is that a cage is very emotive; it is a very simple thing for them to understand. If you are talking about chickens or pigs, it is very difficult to get across the method of production very simply. With the egg industry we have had a very clear advantage, in that the terms are very easy to convey. I think that is why there has been a 2% to 3% increase year on year in the UK, and also changes happening in other countries.
Q78 Dan Rogerson: We have talked a bit about the potential competitive disadvantage if what is predicted actually happens next year. Obviously, the EU Commission are looking at how they can deal with that. What do you think needs to be done to ensure that UK producers are not at a competitive disadvantage?
David Bowles: The RSPCA point of view is that, first, the directive needs to be implemented entirely on 1 January; secondly, that UK producers who, as Mark Williams said in his evidence, have made the effort to change over should be protected from being undercut by producers in other countries that are acting illegally. The Commission have a choice: either they go down the route of compliance, which is taking a country to the European Court of Justice and then fining it-we all know that that takes a bit of time and the fine may not be commensurate with the damage they have done-or there is a national ban to stop the eggs coming into the UK. The RSPCA is sympathetic to the fact that you may need to have national bans, because I do not think we will see compliance in Spain and Poland with the directive by 1 January. My main concern is to ensure that producers in the UK who have changed over and are farming with a higher welfare system are not undercut by a producer in another country that is acting illegally and farming with a lower welfare system.
Q79 Dan Rogerson: Talking about non-EU countries, which is an issue we have raised, do you think that kind of approach should also be taken in terms of banning things produced to a lower standard? That is a pretty big step in terms of how trade issues are usually dealt with. What is your view on that?
David Bowles: Here we are getting into World Trade Organisation territory. As the Committee is probably aware, we are in the process of having the first ever animal welfare challenge at the WTO. Canada has taken the European Union to the WTO on its seal import ban. That will be a really important challenge, because for the first time the WTO will have to make a decision as to how animal welfare sits with its rules. Let us say the WTO does not allow trade bans on animal welfare grounds. Therefore, the responsibility for ensuring that we do not import eggs that are produced at lower standards than those produced in the EU-for example, barren battery cage eggs-lies firmly with the people who are importing those, so that is retailers. As far as I am aware, every retailer to whom I have spoken and every member of EuroGAP imports at standards that are at the European baseline, so they are not importing below that standard. But we then get into the products side of it. There may well be processors post-2012 who are importing using barren battery cages. That is a real problem. They need to be convinced that they should have their own CSR standards that are at EU baseline standards.
Q80 George Eustice: To press you on that, do you think it is good enough just to rely on the retailers in that situation to enforce a ban? Should we not just knock heads together and sort out the WTO in this regard?
David Bowles: The European Commission could be bold and stop imports. They could also ensure that we do not lower our tariffs. We have the ongoing Doha development round, which ironically has been going for as long as the battery hen ban in 1999. Unfortunately, we are even further from getting a resolution on that. But we do not want them to reduce the tariffs to give the incentive for egg products to come into the EU. I think everyone has a role to play: the NGOs, to make sure consumers are aware and ask for products that are not produced illegally in the EU; the retailers; and processors. Everybody has a responsibility. We have talked to the Commission before about introducing a ban on imports that are not produced to EU standards. I would have to say they are lukewarm about it at the moment.
Q81 George Eustice: But it is a bit upside down, is it not, to be able to ban imports from a European Union country-it is supposed to be a free trade area-but not imports from a country outside the EU that has an even worse system?
David Bowles: Yes, but do not forget that the EU has banned imports internally in the market anyway but only for animal health reasons. For instance, the UK was itself subject to a ban when the BSE issue arose. That has now happily been rescinded. We have never had an internal ban on animal welfare grounds, although it is allowed under the Treaty of Rome. The language of the Treaty of Rome is very similar to that of the WTO. So if the Commission decides that it wants to do an internal ban on animal welfare grounds, maybe a good question to put is: if it is good enough for an internal ban, why is it not good enough for an external one?
Q82 Neil Parish: The recent financial crisis and credit restrictions have made borrowing for reinvestment difficult. This has been further compounded by poor returns for egg producers and record feed prices. In your memorandum you say that English producers have not been eligible for Government support but this has not had a crucial effect on their competitiveness. What is the basis for your assertion on that?
David Bowles: There are two things. First, as far as we are aware there are only three countries that have given assistance to egg producers, one being Scotland. Secondly, if you look at the changeover of production standards in England, even after the Scottish Government gave assistance to farmers there has not been a slow-down in changing over. That changeover is still happening. I assume from that that English producers are still competitive, and because the number and amount of grants was quite small I do not think it really affected competitiveness that much, though it must be galling for English producers to see their Scottish counterparts getting money when they have not.
Neil Parish: One thing we must remember is that the egg and pig industries do not get a single farm payment or money from the CAP, so they have to remain extremely competitive. I think we agree on all sides that we have to make sure that imports do not come in from countries that apply lower standards. That is what we have to work together on, isn’t it?
Q83 Thomas Docherty: I apologise if you are not the right group to ask, and perhaps I should have asked this question earlier. What is the relationship with the Crown dependencies and British overseas territories on these rules? I am not aware of how many eggs we import from the Channel Islands or the Isle of Man, or the other way, but where would they sit? Obviously, they are outside the EU although they have a special trade relationship with the European Union, so how would they be affected on 1 January?
David Bowles: The simple answer is that as far as I am aware no Crown dependency has a huge egg-producing sector. I am thinking of places like Ascension Island and Tristan da Cunha.
Q84 Thomas Docherty: I was thinking in terms of the Channel Islands and the Isle of Man.
David Bowles: There is no big industry there.
Neil Parish: I think they should have to meet the same standards if they come into the European market, shouldn’t they? I think that is how it stands, but whether they do is another matter.
Q85 Chair: I want to follow up the point about competitiveness. In paragraph 6 of your memorandum you say that "Defra has not taken up any of the seven measures to improve animal welfare available to it under the ERDP," the English Rural Development Programme. Of course, if they did use that money it would not be available for other matters on which it is currently being spent; it would be diverted, would it not?
David Bowles: That is precisely correct, and that is why they did not use it.
Q86 George Eustice: On that point, it is pretty clear that you would like to see an acceleration to a free range/barn system everywhere. Do you think there is a danger, given that DEFRA is digging in its heels and refusing to help support farmers to make the change, that once they have made that investment in the new cages and the new system, it moves your ultimate goal of a barn system further away than ever because people have done that bit? They have ticked the box and say they have improved welfare, but now they have made that investment it is harder to say they should get rid of it altogether and go to a barn system.
Alice Clark: I think we could continue to see demand for eggs from alternative systems. Something like that is so hard to predict, but I think there is a massive demand for it from consumers. Retailers are making big changes. They are not just changes that have been made; there are promises and pledges to make changes in future on the processing side, as well as the shell eggs and the retail side.
Q87 George Eustice: Leaving aside the market-led side, which I completely understand-hopefully, it will grow-in terms of the very minimum standard set down in regulation, by opting for a slightly bigger cage-plus system, an enriched cage system, and getting everyone to make the investment in that, have you made it harder to introduce legislation at a future date that says we are not having cages at all?
Alice Clark: I think that when any legislation comes in you have to bear in mind the investment people have made and have a phase-out time. This legislation has shown that you have to do that. It is certainly a consideration but this is the position we are in, so I think that for now you have to base it on that.
David Bowles: The history of European animal welfare legislation is that usually, you ratchet up the standards. For instance, the first legislation on animal welfare on eggs was in 1986. Then we had the 1999 change. The same goes for pigs and calves. But having got to where we are, we are happy with the directive. Of course we did not get everything we wanted, but we are happy with the directive as it is. We will not go back to the Commission next year or the year after and ask them to change the legislation. We are happy with what we have got, and we think consumer power will change those sectors certainly within the UK but possibly in other countries as well.
Chair: Thank you very much indeed for being so generous with your time this afternoon and for your contribution to our inquiry.
Examination of Witnesses
Witnesses: Andrew Opie, Director of Food and Sustainability, British Retail Consortium (BRC), and Andrew Jorêt, Technical Director of Noble Foods Ltd and Deputy Chairman of the British Egg Industry Council, gave evidence.
Q88 Chair: Mr Opie and Mr Jorêt, thank you both very much for being with us. Perhaps you would like to introduce yourselves for the record.
Andrew Opie: I am Andrew Opie, director of food and sustainability at the British Retail Consortium.
Andrew Jorêt: I am Andrew Jorêt, technical director of Noble Foods, which is the largest egg marketing company in the UK and is also involved in egg processing. I am also deputy chairman of the British Egg Industry Council, from whom you heard earlier through my colleagues.
Q89 Chair: At the outset you might just like to describe the interests of Noble Foods and where most of your production takes place.
Andrew Jorêt: We market about 40% of the eggs produced in the UK. We are producing on farms that are both owned by the company and are on contract to us. Just under 20% of the eggs are from farms that we own; 80% come from farms that are on contract to us. We are right across Great Britain but are not involved in Northern Ireland, so we are in England, Wales and Scotland.
Q90 Chair: Perhaps I may ask at the outset about the labelling provisions generally, how the animal welfare provisions affect you and how they are being implemented currently.
Andrew Jorêt: We have always had a very clear policy in the UK of clear labelling, as my colleague Mark Williams indicated. We think that is important. I think it is important that we are transparent on these issues. It then becomes very much a consumer choice as to what type of egg that person wants to buy when they have clearly in front of them the production types available to them. I am not exactly sure when labelling came in compulsorily, but certainly I was involved in the industry when labelling was not compulsory. Our feedback was that when it did come in, it did not really affect sales at all. While labelling is important and it is important to be transparent, personally I do not believe that it holds that much sway in terms of what consumers will do.
Andrew Opie: Obviously, we have always supported clear labelling and gone above and beyond what is legislatively required, although these terms are well defined. I would agree with that to a certain extent, in that labelling is really only an indicator and helps consumers make a quick choice; it does not necessarily sell them itself. But the trend for shell eggs and increasingly for processed eggs is the demand for free range, particularly from retailers in the UK. Some retailers have gone completely for free range shell eggs; some retain some caged sales but also have large numbers of free range sales. But looking at the trends in terms of consumers, over the last decade there has been a definite push towards the free range end for eggs, and increasingly into processed products as well.
Q91 Chair: Mr Jorêt, I think you said in your memorandum that your company produced over 60 million eggs for consumers. Presumably, that is per year.
Andrew Jorêt: Yes.
Q92 Chair: Would you say that 50% of those are already free range?
Andrew Jorêt: That is right, yes.
Q93 Chair: That is helpful. Do you have any concerns about how the directive will impact on you?
Andrew Opie: Not necessarily. The challenge for us is traceability. We heard earlier about some of the concerns quite rightly raised by UK producers that they are not hampered. I think retailers have an excellent record in both traceability and also ensuring that standards are equally applied across agricultural sectors. I think pigs were mentioned in the earlier discussion. Obviously, retailers are quite happy to be judged by their standards on imports as much as they are on products produced in the UK, but certainly in this case, while traceability is quite challenging-think of the number of products in a supermarket that contain egg or use egg in their production-all the major retailers have been actively involved to ensure that the eggs that come into their supply chain meet the regulations before they are introduced in 2012.
Andrew Jorêt: Our concern is really the same as has already been expressed by BEIC. We estimate that about 30% of the eggs in Europe will be non-compliant. We want very strongly this intra-EU trade ban on illegal eggs, but even if the political ban is in place you then have to ask: what sort of policing mechanisms exist? In practice what does it really mean?
Our big concern is that there will be some seepage and leakage. None of us minds competition but it should be fair competition. Clearly, those people have not had to make the investments that the UK industry has made. Those investments, which are the biggest ones I have seen in my career in the industry, mean it costs us more to produce out of those systems. You can very easily be undercut by somebody who has not made that investment. Our big concern in particular, as has already been expressed by previous witnesses, is in the products area where eggs are an ingredient. That might be eggs coming over to be used in manufacture in the UK. Equally, it could be an egg product manufactured somewhere on the continent with locally produced egg that then comes over here. That is the bit we fear most.
Chair: That is very helpful.
Q94 Thomas Docherty: What evidence is there that customer awareness of egg or hen welfare is reflected in their decision about not only shell purchases but the other 50% of the market?
Andrew Jorêt: Free range started in this country in the early 1980s and has grown rapidly since then. At the moment that rate of growth is increasing. When you look at consumers’ motivation for purchase, it would be wrong to assume that all people buy free range eggs just because of animal welfare considerations. Certainly, a lot of them do but, as we find from our own market research, there is also a significant body of people who have a perception that a free range egg is a better quality egg in some way, shape or form. If you do blind testing that is not the case; the eggs are of equivalent quality.
What it also throws up is that there are people out there who do not buy only free range eggs or cage eggs; some consumers buy both. They might buy free range eggs if they are doing a family breakfast at the weekend; they might buy a lot of cheaper value cage eggs if they are doing a big family bake, so it is not always animal welfare considerations. The talk today has all been about animal welfare, but that is not always the reason for the choice.
Q95 Thomas Docherty: In speaking to quite a few colleagues ahead of this inquiry, they were not aware of the range of products that contain eggs. I suspect that is true for the wider consumer. After all, MPs are supposed to be much more knowledgeable than the general public. Do you think those consumers who do express a concern about animal welfare and form the category of purchaser you mentioned are aware that the products they buy that contain eggs are not necessarily free range?
Andrew Jorêt: Again, unless it is a very obvious product that contains eggs, such as a quiche, there is probably value in saying there is free range or cage egg in that quiche, but where you are talking about really hidden ingredients in rather obscure uses, most people will not realise that there is an egg product there, so how can they be concerned about the type of egg that is in there?
Q96 Thomas Docherty: I suppose that is true; yes.
Andrew Opie: I guess that is true, but I think we have seen growth in the use of free range eggs right across. It started very much at the premium end and it has moved on. For example, we have seen some retailers go to completely free range now for their processed products. Remember that egg is also an allergen, so it is labelled on all products. Therefore, if you wanted to look for egg or see whether it was in a product, you would be able to see that. I think that the growth will continue in processed areas. We have seen it a lot in pasta and areas like that; now we have seen it in quiches and more well-known products where you would expect to see eggs, but the growth definitely continues.
There is a demand for free range. Interestingly, the demand for free range has held up extremely well even in the recession. Looking at the IGD’s current figures on shopper trends, it is quite clear that consumer expectation to buy free range products will continue even into next year, which is interesting.
Andrew Jorêt: I would concur with what Andrew Opie said about demand. If you look at either TNS or Nielsen data for the free range market, it is still growing at about 12% per annum, which is quite substantial in the face of the recession. The only egg that has suffered in the recession is organic, which has probably halved in the last two years. The response to that has been that a lot of producers have had to switch off organic farms and convert them back to standard free range farms rather than organic free range farms.
Q97 Thomas Docherty: I go to Tesco on my way home, but I have to confess I am not aware that, for example, a Tesco quiche is labelled as free range. It may be. Do you think that consumers are putting pressure on retailers in particular, and that when they go into Sainsbury or Tesco they apply pressure for them to switch to free range in their quiches or other products?
Andrew Opie: Yes. There is definitely a growing demand, and because it is a premium product it will cost more to produce, because free range eggs will cost more. The retailer will want to make that easy for the consumer to find, and they will identify that in the product, so "pasta made with free range eggs" or something like that will be in the label so people can find it. It is not in their interests to sell a product that costs them more to produce for a lower price, when there might be an alternative product on the shelves that is made with caged hens’ eggs. So they will try to make it as easy as possible for you as a consumer to find it, because it is costing them more to produce and it is generally a premium product.
Q98 Thomas Docherty: Obviously, companies like Mr Kipling in a more high-profile way made that move across. Could you comment on the impact on the consumer of companies like Mr Kipling making that high-visibility switchover?
Andrew Opie: I think it just continues that trend. We heard earlier that free range is something that consumers seem to grasp and want; they believe that if they spend extra on a product they will be rewarded by a value product. I think high-profile brands help. You will have seen some of the statements retailers have made in terms of their determination to sell either only free range or to move to free range products. That is because it helps them sell their whole brand. It is enhancing their brand in terms of their consumers and what they are offering overall on animal welfare. There is definitely an incentive for brands to follow that kind of lead and make it clear that they are selling free range and are supporting the free range process.
Q99 Amber Rudd: Do customers get most of their information about the products from packaging or from other sources such as advertising, magazine articles and so on?
Andrew Jorêt: There is limited information available on the egg pack; there is standard nutritional information and usually some description. You will also find there is access to websites by trade associations, such as our Lion website, which would be advertised. If you go on to that there is a lot of information about all kinds of production methods and anything you want-or even company websites if it is a specific brand. I think people would get their information from that rather than the limited amount on the pack itself, but that pack can give you access, if you want it, to greater sources of information through the web.
Q100 Amber Rudd: Do you think it is good for business when companies advertise that they buy or sell only certain types of high-quality egg?
Andrew Jorêt: As business men, we think it is good anyway when people are promoting eggs in whatever shape or form, full stop. It is right that the words "free range" have almost become a brand. Therefore, as Andrew rightly said, if someone is using free range eggs they will want to advertise the fact that they are doing that because they would see marketing value in doing that.
Q101 Neil Parish: I think it shows that over the years you have been able to market free range compared with battery hen eggs and people are beginning to differentiate, and you see a much bigger take-up of free range eggs. Do you think the consumer would be ready to differentiate between a cage egg and an enriched cage egg? That will not be the point here, hopefully, if we can stop them coming in, but it will be in some Member States very difficult to market. What is your view? What is the difference from the consumer’s point of view?
Andrew Opie: I would agree with your assessment. I think the issue is free range or caged. As we have seen with some of the other animal welfare issues, in the case of pigs there were some issues about tail-docking and some minor issues about welfare. It is much harder to sell to consumers than stalls and tethers, for example. It is a very visible thing; it is very tangible for a consumer to get to grips with. I would think it would be extremely difficult. I am not sure many people would want to advertise that fact. It would be difficult to get that as a premium when you are in the market against free range, for example.
Q102 Neil Parish: Further to Mr Docherty’s question, how much pressure are retailers putting on food manufacturers to use higher animal welfare standards for eggs?
Andrew Opie: It is definitely a process that they are all going through now. I have seen a couple of recent statements by retailers to confirm that is the case and I have spoken to them myself, so it is a case of going through the specifications with their suppliers and making sure that they source from the right places, but this is what they do day to day anyway. This is traceability and food safety, so it is something that can be done and will be done. It is quite a complex process, because we spoke about the number of egg products that are used, but it is something they are going through at the moment. It is possible to do it. If it is possible for retailers to do it, it is possible for other manufacturers to do it.
Q103 Neil Parish: Especially when it comes to using powdered or liquid egg, surely that must be the most difficult thing to trace.
Andrew Opie: It is more difficult to trace, but we have seen cases. Unfortunately, recently we saw a case in this country involving dioxins. There had to be a very small withdrawal. Eggs had come from Germany via Holland. It is possible to trace those and withdraw the product. It takes a little time and work with your supply base, but it is absolutely possible to do.
Neil Parish: The European Commission does not seem to want to add an additional code for the egg that does not comply with the legislation on enriched cages and is produced now in standard cages. Provided it does not come into the country, that is fine. I agree that if it does not have any mark on it at all, it would not be identifiable because you would not be able to trade it, but surely there must be temptation in some Member States, especially if they have a mixed poultry farm with some enriched cages and some existing battery cages, just to put the same mark on it.
Q104 Chair: If I may broaden that question, is the issue not one that was put by Roy Kerr, an egg producer: it is not so much the eggs that are produced in the EU Member State; it is eggs that are exported into another EU Member State and are then in free circulation? As he put it, these are production units outside the European Union whose main intended market is inside the European Union to take advantage of the lack of border controls and traceability of egg in liquid or product form. Do you believe that after the EU directive comes into effect, that will be compounded, Mr Jorêt?
Andrew Jorêt: At the moment there are not many third countries that can import shell eggs into the European Union because of our salmonella rules. There must be equivalence there, even though there does not have to be equivalence on animal welfare. So to a certain degree we are protected.
Q105 Chair: That is in shell?
Andrew Jorêt: That is in shell, yes. It is not true of eggs in product; it could be dried product and so on. That is the problem area.
Q106 Chair: I think the original question was specifically about liquid or product form, which is shell. Is this an issue now, and do you believe that it might be a greater issue if the EU directive comes into effect?
Andrew Jorêt: It is not a big issue today, but it will increasingly become an issue because on the one hand costs are going up in the EU because of the directive, and at the same time the protection that exists by means of tariff barriers for imports from third countries at some stage will reduce whenever there is a final conclusion on the Doha agreement. Therefore, that would leave the whole EU potentially more exposed to competition from certain countries. The countries we would fear would be those like Ukraine, China, Mexico and the United States, who are very big producers of very low-cost powdered egg.
Andrew Opie: It comes back to the point I made earlier. Responsible companies will think very carefully about their own supply chains. Would you want to take from countries where you put yourself at risk? Ultimately, aside from the food safety risk, there is reputational damage if you had not audited something in your supply chain and had not traced it properly and found it was a problem. I do not believe that would be so for the major retailers because they would not want to put their reputation at risk; they will make sure that their supply chains are robust, safe and can supply the kind of quality that they and their consumers demand.
Q107 Chair: Perhaps I may run past you something Lord Rooker told the Committee in our evidence session on animal cloning. He said that "you can technically tell whether an egg is free range or not". If I may expand that, other than whether a number is on it, how do you establish whether an egg has been produced in a conventional or enriched cage?
Andrew Jorêt: Are you asking: is there a way to distinguish?
Q108 Chair: Can you?
Andrew Jorêt: No. In fact that would apply not just to eggs in cages; it would apply if you had unmarked free range and cage eggs. You would not be able to tell one from the other. There are one or two technical tests that people are beginning to look at, but it is more to do with very technical issues about isotopes, which tell you the locality where it might have been produced but not necessarily whether it is free range or cage.
Q109 Chair: What is your response to Mr Parish’s question about the Commission’s reluctance to use production method codes?
Andrew Jorêt: While we would like to have a differing production indicator, the likelihood anyway is that we will have farms on the continent, in those countries that do not comply, that are partially compliant. If they are to produce illegal eggs I am sure they will also mark them illegally anyway, so whether or not we have the number they will probably use it wrongly. Therefore, I think the important thing for us politically is to have the ban in place and then for us as an industry to work very hard with our Lion scheme to say that, if you want to ensure compliance, you go for Lion shell eggs or Lion egg products. That is the pressure that we will be applying as an industry towards the end of this year.
Q110 Thomas Docherty: One thing that fascinates me is that if you go into the big supermarkets these days you find world foods. Tesco has huge aisles and other specialised retailers provide imported finished products. I suppose my question is to Mr Opie, although Mr Jorêt may want to add something. What is your impression of what will happen on 1 January if, for the sake of argument, Spain, Portugal and Poland have not complied and they produce a product-a cake, biscuit or whatever else-and then expect to export it here? Has your organisation discussed with the Government, be it BIS or DEFRA, the legal implications and practicalities of a ban?
Andrew Opie: We have not discussed that with them. Our companies are really looking only at their own brand products, so they could not necessarily speak, for example, for the manufactured products that are on their shelves. Remember that they completely control only their own supply chain. About 50% of products in a typical supermarket would be own brand; about 50% would be branded products. They have control of their own supply chain, so they would be in control of those and they will be going through all the steps of traceability at the moment. If you wanted to speak to branded manufacturers you would have to ask them that question.
Q111 Thomas Docherty: So for argument’s sake, Sainsbury or Tesco have no view on whether or not cakes or biscuits from Poland or Spain would fall foul of that. I am surprised by that.
Andrew Opie: Our members would prefer that you did not buy the branded products and bought their own brand products. That is why they are so robust about their brands. They will say that they have been through all these traceability issues and can demonstrate to consumers where their eggs are coming from and to what standards they are produced, and they would hope that that would persuade the consumer that that was the right thing to do, because then they would buy their products.
Q112 Neil Parish: You have partly answered my question. One of the things is the policing of all this. I remember from the foot and mouth inquiry that it is basically a paper trail from the country it has come from, and very few physical inspections are ever done, and with eggs it is probably even more difficult. From your point of view is there anything more we can do to make policing easier and more robust?
Andrew Jorêt: Unless you start to look at port and border controls, not really. That was really my earlier comment: we think it is very important that politically this ban on illegal egg is in place, because then if there is leakage and it is exposed, hopefully the issue is that through embarrassment, people will stop doing it. I think it is then down to us as an industry to look after ourselves, and that is why we are very pleased we have a strong Lion scheme. We are going to use that, and we will be promoting through the Lion that if you want an assurance of compliance, look for the Lion for both shell eggs and egg products.
Andrew Opie: Similarly with the retailers, regulation is fantastic and enforcement is great, but because of due diligence issues they invest in their own supply chains; they carry out audits in their own supply chains. Andrew will know as a supplier that they will come and see him and his producers regularly to check that they are doing what they say they should be doing to the right specification. A lot of auditing goes on. For example, in food safety we have a BRC standard that is used throughout the world in terms of factories, productions and safety and the ingredients that go into those factories. There are plenty of audits available to those companies that are prepared to invest in them.
Q113 Neil Parish: Do you do that on processed products as well?
Andrew Opie: Definitely with processed products, yes.
Q114 Richard Drax: Do you have any concerns that the implementation of this directive could lead to an egg shortage? Is there any risk of that, or not?
Andrew Jorêt: The degree of non-compliance in Europe that we anticipate is so great-
Richard Drax: It is one third, is it not?
Andrew Jorêt: -that it is unthinkable that that production will just be slaughtered because it is illegal. That will not happen, so that egg will be there. So I do not think there will be an immediate shortage. Our concern comes back to unfair competition.
Andrew Opie: I certainly would not think there would be any immediate problem with shell eggs because they are 100% UK on major retailers’ shelves, so that is covered. We have heard earlier that all of them will be compliant. As to processed eggs, a lot of that product would come from the UK anyway; what went into the supply chain would be manufactured here, and a small element would come from the EU or outside the EU. Therefore, we would not anticipate any problem, particularly not with shell eggs but not with processed products either.
Q115 George Eustice: Mr Jorêt you said earlier that you supported an intra-EU ban on eggs that did not comply. I just want to ask Mr Opie whether that is also the position of the British Retail Consortium. Would you support an intra-EU ban on product within the EU that did not come up to standard?
Andrew Opie: Yes, absolutely. I said earlier that our main supplier base is UK farmers. The last thing we want to see is our own UK supply base hamstrung because it is being undermined by illegal imports. It is not something that we will entertain in our supply chain, so we do not see why they should also be subject to unfair competition. We would not have a problem with that. It will not affect our supply chains; we will still put the same products on the shelves as we do now, and we are taking steps to make sure that we do not take illegal eggs. Therefore, it would not affect us and we do not see why UK farmers should be affected adversely.
Q116 George Eustice: The other area in which I was interested was the extent to which the move to enriched cages might affect demand for other production systems, such as barn-produced eggs or free range. There is no doubt that cage-produced birds became a kind of totem for factory farming generally over the last 25 years. The Daily Mail would cover it-chickens are always up there. That is undoubtedly what has driven the success of free range egg production, but is there a danger that this undermines that if basically people take the view that it is all okay now because these new regulations are in place? Do you see that having an impact on demand for free range?
Andrew Jorêt: I suspect not, and that the people who are buying cage egg do so because they are very price-driven. They probably do not want to be reminded about the production method, if I am honest about it; it is all about price. The colony egg will still be substantially the cheapest form of egg production. Therefore, while we are talking very much about free range growth, we are not also talking about the complete demise of any cage production in this country. I think that will go on for some time to come.
Andrew Opie: I would concur with that.
Q117 Chair: Referring to feed and energy prices, have they had a big impact on your production and operating costs?
Andrew Jorêt: At farm level very much so. Feed is the biggest single item of cost in eggs at farm level, whether it is cage, colony or free range eggs, and that has nearly doubled. That has put producers under enormous short-term pressure because as of yet, that has not really translated through into retail prices so we can feed back additional margin to producers. Therefore, in the short run there is a problem.
My colleague Mark Williams indicated that there had been a little imbalance in the market. Collectively, we have slightly over-expanded on free range and have had a surplus. That expansion is temporarily on hold while the market catches up with itself, which it is doing. We forecast that by the end of the summer we will be back in balance. We will then perhaps see prices having to rise to reflect the higher costs.
When you look at forward pricing, wheat today is about 195; new crop wheat is still coming in at about 170. It is at a record high level; it has never been there before. Therefore, it is not just a case of going through a short period when there are high food costs and we all tighten our belts and struggle and then carry on at old levels. I think there must be some translation of pricing through into the consumer market in the end.
Andrew Opie: It is a very difficult market at the moment, because on the one hand you have real pressures on suppliers, which we are very well aware of. Retailers themselves have rising costs. Oil is really important in terms of distribution and all those sorts of areas. On the other hand, you also have consumers who feel increasingly under pressure. Therefore, you have a market where according to our figures food prices have risen by about 4%, which is unusual. We have been through periods of deflation, not inflation. However, we have consumers who are increasingly under pressure in terms of their own budgets, so to try to pass those on but also ensure a sustainable future for farmers is increasingly difficult.
Chair: You have been very generous with your time. Thank you very much indeed for your contribution to the inquiry.
|©Parliamentary copyright||Prepared 8th March 2011|