High supply depresses price
Christopher Serju, Gleaner Writer
"THERE IS egg everywhere, man. Egg everywhere. No shortage at all. The farmers will continue to sell below their costs (and) will continue to make themselves bankrupt."
While that statement by Mark Campbell, immediate past president of the Jamaica Egg Farmers Association (JEFA), means good news for consumers who will be spared the annual price hike associated with the increased demand, it could just as well herald the demise of small farmers who now produce the majority of eggs.
In his Budget presentation for the fiscal year 2012-13, Finance Minister Peter Phillips announced the imposition of the 16.5 per cent general consumption tax (GCT) on chicken eggs, as part of measures to stimulate the economy and generate additional revenue. However, following protests from the egg farmers and the opposition, Government recanted, removing the tax from pullet and hatching eggs but retaining it on table eggs. Egg farmers continued to protest, warning that the cost increase would result in a decline in sales.
While the impact of the GCT, which caught the farmers off guard, has been well ventilated, for Campbell the entry of the Caribbean Broilers Group of Companies into that market has been a de facto silent killer.
is campbell right?
Just over a week into what traditionally has been the period when egg farmers enjoy their best sales, with demand for the critical ingredient in baking spiking and prices soaring, Campbell sounded like a man staring into the wrong end of a double-barrelled shotgun, while speaking to AgroGleaner who on Monday.
"We have monumental problems, man. The two biggest ones are the entry of CB (Caribbean Broilers) into the retail side of the egg business, maybe about a year now. They are intent on taking over the egg. In two years' time, at most, they will be the only ones in the egg business in Jamaica. So we have another JPS on our hands," Campbell said, making the analogy with the energy distribution mono-poly the light and power company has long enjoyed.
Continued Campbell: "The other thing, which in my personal view is a smaller danger, is the GCT that Government put on the eggs, but the bigger one is the entry of CB. They sell us feed, which is our greatest expense. They sell you the eggs, they sell you packaging material and they turn around and compete with you at the retail level, for the market. So we can't survive at all!"
Dr Keith Amiel, corporate affairs manager for the Caribbean Broilers Group, confirmed that its subsidiary is en route to achieving the status of largest egg farmer in the country. CB Group entered the retail egg market by purchasing Chippenham Farms, through which it markets a range of regular brown eggs and white Smart eggs, which are bred specially with a combination of products to increase the omega-3 content to between six and eight times that of normal eggs.
Amiel, however, declined to disclose its market share, explaining that the egg farm enjoys a no-cost discount privilege from another Caribbean Broilers subsidiary, which specialises in animal feeds. He told AgroGleaner: "Newport Mills, Nutramix Feeds is a profit centre and the egg operations Chippenham Eggs buys feed from Newport Mills in exactly the same way as anybody else buys."
the enemy within
On the question of a "strategic advantage", Amiel pointed to its well-established competition with Jamaica Broilers Group in the broiler chicken market, "So there is nothing new about us in some respects being seen as competitors."
However, for Mark Campbell, the imme-diate past president of the JEFA, Caribbean Broilers has pressed home its advantages too painfully close, having applied for and been granted membership into the association.
Campbell explained the decision: "We have taken them in because once you produce eggs, that is our obligation. So now the enemy is within. He is no longer without. Some people think it is better to have them close, where you can see them, but they can also see you, so we are in a no-win situation."
Whatever the reasons, it is obvious that the other egg farmers and CB are seeing the market from two different ends, as Amiel explains: "Unlike a number of egg farmers who have complained about the GCT that they put on and its negative effect on sales, we have not found that at all. We are supplying our supermarkets and our customers and, as a matter of fact, we have had to commandeer eggs from a number of other egg farmers in order to meet the demand for eggs."
In contrast, Campbell relates a recent encounter with an egg farmer: "I just met one significant farmer five minutes ago, backed up with his truck here in Falmouth where I am, and he tells me he is selling at $40 dollars below his cost of production. I know farmers who have told me that unless something dramatic happens by now and the end of the year, they will be out of business."
Selling at $150 a dozen this egg farmer, according to calculations used by the association based on the Ministry of Agriculture and Fisheries data bank formula, was well below the $193 it costs to produce a dozen eggs. This, according to Campbell who has been in the business for more than three decades, is barely enough to cover the cost of feed, leaving him unable to meet the many other input costs - wages, packaging, transportation, replacement birds - unless it's from another source of income, but definitely not the farm.