Organic hen eggs from free-range systems: economics of production and marketing

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1 Organic hen eggs from free-range systems: economics of production and marketing A.S. TSERVENI-GOUSI 1 *, A.L. YANNAKOPOULOS 1 and E. SOSSIDOU 2 1 Department of Animal Production, Veterinary School, Aristotle University of Thessaloniki, Thessaloniki, Greece 2 National Agricultural Research Foundation, Animal Research Institute, Giannitsa, Greece *Goussi@vet.auth.gr Keywords: organic eggs; free range system; marketing; Greece Summary Organic eggs from free-range systems are those produced by hens fed rations having ingredients that were grown without pesticides, fungicides, herbicides or commercial fertilizers. This survey aims to analyze the profile of a free-range farm producing organic eggs under Greek conditions of production and marketing. The data concerning the production and marketing were derived from a Greek farm which produces organic eggs using the free-range system. Data has been collected and analyzed over a period of 52 weeks (one year). The analysis of the data gained under the study resulted to the following: The number of the produced eggs was eggs/hen while the number of the eggs sold totalled at eggs/hen. The additional food intake was up to kg/hen that is 27.3% less than the intensive poultry production. The cost related to the pasture rent and the labour, consisted the 18.84% of the total production cost, while the feeding cost consisted 45.04% (27% less than the intensive poultry production). The total production cost was euros/hen with a profit of euros/hen. At the end of the laying period, hens came on the meat market and offered an important return (13.52% of the total income). Finally, the egg market in two major cities of Greece, Athens and Thessaloniki, presented two peaks over the year: 1 st April (Easter) and in the beginning of autumn (consumers return from summer holidays). On the contrary, in Myconos (Cyclades) and Ithaka (Eptanysa) islands, the sales of these eggs showed peaks in July and August, due to the increased number of tourists. The economic outlook for the production of organic eggs in free-range systems in Greece is quite satisfactory. Moreover, the Greek market for organic eggs opens up new prospects. Introduction Recent food scares in Europe have increased egg consumer concern about what they eat and how it has been produced. These conditions have driven to less intensive systems of egg production. Organic or alternative egg production (free-range, aviaries etc.) has increased continuously over the last decade, without, however, reaching higher market shares; the contribution of these eggs to overall production differs considerably among EU member states (Windhorst, 2004). According to the USDA report, egg production growth constrained in the EU-15 (old Member States) by higher production costs and lower margins; however, the EU-N10 (new Member States) were expected to gather pace due to relatively favourable production conditions related to a good environment for investment, proximity to important consumer markets and a strong domestic market (USDA, 2005). The development of EU organic or alternative egg production could be strongly influenced in the near future by Eastern Europe countries. Already, countries like Hungary are exporting organic poultry products. Free-range production presents an alternative to factory farm poultry and eggs that conveys a positive image of animals living outdoors as nature intended. The term Free Range refers to those hens that are not confined to large indoor commercially intensive batteries. In general, these eggs are more expensive than eggs from hens fed conventional feed due to higher production costs and lower volume per farm. Also, according to Emous and Fiks-van Niekerk (2004) there are some issues that restrain farmers from switching battery cages in to alternative systems (free-range): more labour is needed, the number of floor eggs increases, management is more difficult; as a result, eggs are more 379

2 expensive. According to Thear (1997) the average price of free-range eggs is 35p a dozen above that of battery produced eggs. Generally, organic egg production means that birds are produced under free-range conditions but with lower stocking densities. Organic hen eggs from free-range systems are eggs laid by free-range hens, which are allowed to roam outdoors, and feed freely on a certified 100% organically grown grain based diet. The hens, that lay organic eggs, also enjoy more space than other free-range chickens both inside the houses (5 birds per square metre) and outside (4 metres squared per bird). Poultry production can be a profitable enterprise for organic farmers and eggs are a popular product that can be sold through many outlets - locally and nationally. However, chickens have particular management requirements that may not be obvious to the inexperienced producer. In Greece, organic production only recently became the focus of significant attention from governmental and private organizations, consumers and farmers (Fortomaris et. al., 2004). From the total of Greek poultry enterprises, only 48 are the organic ones certified by three private certification and inspection organizations (Dio, Biohellas and Physiologiki), whereas 83 enterprises are certified by the national organization (Agrocert) for their special poultry farming products as free range products, or products produced under certain nutritional methods (Fortomaris et. al., 2004). The annual increase for the year 2002 was 106% for the total number of poultry reared organically. Moreover, the trade of organic poultry products is limited into specialized stores, as well as large supermarkets located in urban area markets mainly. There is no reliable information available about the economy of production of organic hen eggs from free-range systems in Greece. This survey aims to analyze the profile of a free-range farm producing organic eggs under Greek conditions of production and marketing. The information is designed to give an idea of the potential earnings that can be achieved from becoming an organic free-range egg producer. Materials and methods The data concerning the production and marketing were derived from a Greek small scale farm which produces organic eggs using the free-range system and has been certified by a recognized organization ( Physiologiki ). Data has been collected from a total number of 2,500 hens over a period of 52 weeks (March 2002-March 2003) in order for the costs and returns to be estimated and the constraints in egg production to be found out. A special, exclusive, natural feed has been developed for the hens using organically certified grains, with no animal by-products and residue from pesticides, drugs or other chemicals. Also, this hens' cereal diet, which was available for them to peck at constantly, was free from GM ingredients and artificial yolk colorants. Rotated paddocks allowed continual access to fresh, unsprayed, green herbs and grass, which made up 70% of the hen's natural intake. Free range hens were raised outside, on fresh green pasture, in small groups, protected by medium size pens. Pop holes were created, to allow hens access to the inside range where egg nests were provided. The housing conditions (outdoor and indoor space requirements), as well as animal care, disease prevention and veterinary treatment were laid out according to EU regulations for free-range (EEC-Regulation 1274/1991 and EC 2295/ 2003) and organic production (EEC-Regulation 1804/1999). The eggs were collected by hand three times a day. This number as well as the number of sold eggs, the additional food intake and mortality were recorded on a daily basis. The produced eggs were sold to retailers or directly to the final consumer at local markets. The areas of sales and the price of sold eggs were recorded. Results and discussion FINANCIAL RESULTS The production expenditures, the gross income and the net profit of organic free-range eggs during the flock cycle (52 weeks) are illustrated in Tables 1, 2 and 3 respectively. 380

3 Table 1 Production cost (euros) of organic free-range eggs. Item Total Per hen Per m 2 of pasture 1. Land (pasture) Rent (0.74)* 0.12 (0.71) 0.02 (1.09) 2. Labour Family 2,235 (6.03) 1.02 (6.06) 0.11 (5.97) Other 4, (12.08) 2.03 (12.06) 0.22 (11.89) 3. Capital (fixed and variable) Feed 16, (45.04) 7.58 (45.02) 0.83 (44.88) Pullets 6, (17.43) 2.94 (17.46) 0.32 (17.31) Variable (electricity etc.) 1, (3.18) 0.54 (3.22) 0.06 (3.26) Preventive medication (0.87) 0.15 (0.89) 0.01 (0.55) Taxes (1.50) 0.25 (1.49) 0.03 (1.66) Depreciation (eg. building) 3, (8.31) 1.40 (8.32) 0.15 (8.16) Insurance etc. 1, (2.88) 0.47 (2.79) (3.07) Certification fee ( Physiologiki ) (1.42) 0.24 (1.44) 0.03 (1.67) Miscellaneous (0.52) 0.09 (0.54) (0.49) TOTAL PRODUCTION COST 37, (100.00) (100.00) 1.85 (100.00) Table 2 Gross income (euros) of organic free-range eggs. Item Total Per hen Per m 2 of pasture Number of sold eggs 352, Gross income (euros) 1 56, (86.48)* (86.48) 2.81 (99.65) Gross income (euros) 2 8, (13.52) (13.52) 0.01 (0.35) TOTAL GROSS INCOME 65,188.6 (100.00) (100.00) 2.82 (100.00) 1 From the egg sales (price: euros/piece) 2 From the carcass sales (price: euros/piece-number of sold pieces=2002) Table 3 Net profit (euros) of organic free-range eggs. Item Total Per hen Per m 2 of pasture Gross income 65, (100.00)* (100.00) 2.82 (100.00) Production expenditures 37, (56.86) (56.85) 1.85 (65.60) NET PROFIT 28, (43.14) (43.15) 0.97 (34.40) The produced eggs during the flock cycle (52 weeks) were eggs/hen. Although, it is not a large number, it is generally accepted that the egg production is lower in free-range, than caged systems. The sold eggs totalled eggs/hen (81.1% of the produced eggs). The difference of 18.9% between produced and sold eggs is due to losses from floor eggs, as well as dirty, small etc. According to the findings of Emous (2005), floor eggs is one of the significant oracles for egg producers familiar with cage systems, who change to an alternative system. Mortality was estimated at 8% (0.15% per week). This figure is in agreement with the records of Patterson et al. (1999). Generally, it is accepted that mortality rates are likely to be higher in birds kept under range conditions. Thear (1990) cites rates of 5%, 5% and 8% for caged, perchery/barn and freerange layers, respectively. Also, according to the findings of Tucker (1989) and Lampkin (1997) the average mortality rates are 8% for organic layers, 8% for free-range and 5-7% for the caged ones. The total additional food intake was up to kg/hen, that is 27.3% less than the intensive poultry production (43.0kg for the caged hens-lampkin, 1997). The cost related to the pasture rent and the labour, consisted the 18.84% of the total production cost, while the feeding cost consisted 45.05%. The egg hand-collection three times a day, made free-range production more labour intensive, than 381

4 the caged one. Organic eggs, as it is mentioned above, are produced from hens that have been given feed, in which all of the ingredients were grown without the aid of commercial fertilizers, pesticides, or herbicides. This kind of production in relation with the shortage of organic feedstuffs (total certified organic land area in Greece=38,995ha) makes the cost of production more expensive, and as a result the price of organic eggs higher than conventional ones. It is important to notice that greens (especially purslane) substantially increased the nutritional value of free range hens, particularly in omega-3 fatty acids and in Vitamin A. Simopoulos (2003) reported that chickens, that grazed on wild plants and purslane in the Peloponnese area, in Greece, laid eggs that contained twenty times more omega-3 fatty acids, than standard supermarket eggs. Also, Lopez-Bote et al. (1998) suggested that some constituents of grass might aid the production of eggs, rich in (n-3) fatty acids. Total production cost was euros/hen or 1.32 euros/dozen of eggs (Table 1). The cost production of a dozen of free-range eggs produced in the EU countries in the year 2003, was up to 45% higher than that of a dozen of caged eggs (0.95 vs dollars, respectivelyhttp://eurogroupanimalwelfare.org/pdf/eggsummaryen). According to the findings of Elson (1994) costs of production of free-range systems are higher than those more conventional caged systems. Also, Elson (1985) estimated that the relative cost of a free-range system, stocked at a rate of 400 birds/acre, was 150% that, of an intensive battery system. The total profit was euros/hen coming mainly from the egg sales as well as from the meat sales. At the end of the laying period, hens came on the meat market, sold as organic stewing hens and offered a quite important return (13.52% of the total income). MARKETING Marketing is the development of a product to fill the demand. The most important factors which play a decisive role in the development of organic agriculture in Greece are technological know-how, economic support and market (Louloudis, 2001). The price of the organic and free-range products is very important, in order for the gross margin and profitability of organic and free-range production to be determined. The average price of the current organic free-range egg was euros/piece. According to Thear (1997) the average price of free-range eggs is 35p a dozen above that of battery produced eggs. The egg market in the two major cities of Greece, Athens and Thessaloniki, presented two peaks over the year: 1 st April (Easter) and in the beginning of autumn (consumers return from summer holidays). On the contrary, in Myconos (Cyclades) and Ithaka (Eptanysa) islands, the sales of these eggs showed peaks in July and August, due to the increased number of tourists (Figure 1). Thessaloniki Eptanysa Athens Cyclades Figure 1 Greek areas with the larger organic-free range egg sales. 382

5 Conclusion An analysis based on the current study indicates that the economic outlook for the production of organic eggs in free-range systems in Greece is quite satisfactory. Moreover, the Greek market for organic eggs opens up new prospects especially in big cities and areas with large number of tourists (eg. islands). However, further market survey is necessary to establish market potentials and accessibility. References ELSON, H.A. (1985). The economics of poultry welfare. In: Proceedings, 2 nd European Symposium on Poultry Welfare (Wegner, R.M. ed.), World s Poultry Science Association, pp ELSON, H.A. (1994). The economics of modified enriched cages (MEC) compared to other systems of egg production. Modified cages for laying hens. Proceedings of a symposium held at Nobel House, London, UK. Universities Federation for Animal Welfare (UFAW) EMOUS, VAN, R.A. (2005). How to prevent floor eggs in alternative layer housing systems. Poultry International Vol. 44 (2):16-18 EMOUS, VAN, R.A. and FIKS-VAN NIEKERK, T.G.C.M. (2004). Higher mortality in free-range aviary houses. World Poultry Vol. 20 (6):26-27 EUROPEAN COMMISSION (1991). Council Regulation, No 1274/91 implementing Council Regulation (EEC) No 1907/90. Official Journal of the European Communities. OJ L 121, EUROPEAN COMMISSION (1999). Council Regulation, No 1804/99 supplementing Regulation (EEC) No 2092/91. Official Journal of the European Communities. L222, EUROPEAN COMMISSION (2003). Council Regulation (EC), No 2295/2003 implementing Regulation (EEC) No 1907/90. Official Journal of the European Union. L340/16, FORTOMARIS, P., ARSENOS, G., TSERVENI-GOUSI, A. and YANNAKOPOULOS, A. (2004). The practice and prospects of organic poultry production in Greece In: Proceedings of the 22nd World s Poultry Congress, Istanbul, June 8-13, 2004 (CD). LAMPKIN, N. (1997). Organic Poultry Production. Welsh Institute of Rural Studies, The University of Wales, Aberystwyth LOPEZ-BOTE, C.J., SANZ ARIAS, R., CASTANO, A., ISABEL, B. and THOS, J. (1998). Effect of free-range feeding on n-3 fatty acid and α-tocopherol content and oxidative stability of eggs. Animal Feed Science and Technology 72:33-40 LOULOUDIS, L. (2001). Biological agriculture in Greece: Constrains and opportunities for development. Paper presented to the Seminar: The common agricultural policy and the environmental challenge-new tasks for the public administrations? European Institute of Public Administration (EIPA). Maastricht (NL), May 2001 PATTERSON, P.H, GREASER, G.L. and HARPER J.K. (1999). Small-scale egg production (organic and nonorganic). Agricultural alternatives. PennState College of Agricultural Sciences, Cooperative Extension SIMOPOULOS, A.P. (2003). Importance of the ratio of omega-6/to omega-3 essential fatty acids: evolutionary aspects. World s Review of Nutrition and Dietetics. Ed. A.P. Simopoulos, Cleland LG, vol. 92 THEAR, K. (1990). Free-range poultry. Farming Press, 1 st edition, 179 pp THEAR, K. (1997). Free-range poultry. Farming Press, 2 nd edition, 181 pp TUCKER, S. (1989). Alternatives? ADAS Poultry Journal 3(1): 30 USDA (2005). Consumption egg production in the European Union. International Egg and Poultry Review vol.8(8) pp.1 WINDHORST, H.,W. (2004). Development of organic egg production and marketing in the EU. In: Proceedings of the 22nd World s Poultry Congress, Istanbul, June 8-13, 2004 (CD). 383

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