Bakery sector faces ‘perfect storm’ as egg prices soar

A wave of unprecedented pressure in the world market for raw materials has left the bakery industry facing a ‘perfect storm’ of tightening supplies and rising prices, Arla Food Ingredients has warned.

In particular, the cost of eggs is under severe upward pressure on several fronts globally, prompting many cake and pastry manufacturers to switch to egg replacers – such as Arla Food Ingredients’ Nutrilac® – in order to cut overheads.

The recent implementation of the EU’s Welfare of Laying Hens Directive, which banned the use of cramped battery cages, has led to soaring egg prices in Europe because egg producers in as many as 10 EU countries – France, Spain, Belgium, Italy, the Netherlands, Hungary, Greece, Poland, Portugal and Cyprus – have still not met requirements for more spacious ‘enriched’ cages. As a result, supplies of legal eggs across Europe have tightened, hitting bakers hard in the pocket.

The situation shows no signs of easing. Experts predict that from next year the European Commission will start to come down hard on producers who continue to flout the directive, forcing them to meet the requirements or shut down. Many producers are expected to quit the egg industry because of the cost of investing in new cages – leading to further egg price rises.

Beyond Europe, too, a combination of extraordinary events has conspired to push egg prices through the roof:

• In Mexico, which is the world’s biggest consumer of eggs, a bird flu epidemic has resulted in the slaughter of millions of chickens. This has prompted the Mexican government to relax import restrictions on eggs from the US and Asia, leading to shortages and higher prices elsewhere on the world market.
• Poor grain harvests in the US and Russia have forced up feed prices and will continue to do so through 2013. Since feed accounts for 60% of egg production costs, this will result in further upward pressure on egg prices worldwide. Grain shortages will also lead to higher flour costs – creating an extra headache for bakers.

There is, however, light at the end of the tunnel. According to a new calculator developed by Arla Foods Ingredients, and launched this week at IBA 2012, cake and pastry manufacturers could save more than €1 million annually by replacing just half of the eggs they use with egg replacers.

The Nutrilac® calculator, which can be seen on Booth 570, Hall A5, shows that a large cake manufacturer using 10,000 tonnes of liquid eggs a year would save €1.35 million by using egg replacers on a 50% replacement ratio. Those using a greater proportion of egg replacers would stand to benefit from even greater economies.

The savings are potentially huge for companies of all sizes. The Nutrilac® calculator shows that a cake manufacturer using 750 tonnes of liquid egg a year could make savings of around €100,000 annually by switching to 50% egg replacers.

The calculator is named after Arla Foods Ingredients’ Nutrilac® range of egg replacers. Manufactured from fractionated whey proteins, Nutrilac® egg replacers are not only less expensive than eggs, but they are also lower in calories, saturated fat and cholesterol. They have a longer shelf life – up to 18 months – and they produce great tasting end products.

Søren Nørgaard, Senior Manager at Arla Foods Ingredients, said: “It’s clear to see that bakery manufacturers face a real perfect storm that is increasing the price of key raw materials and, in particular, eggs. Fortunately, our Nutrilac® egg replacers can help companies keep costs under control without any negative impact on product quality, helping them to maintain profits and retain contracts by keeping prices to customers stable.”

Arla Foods Ingredients is inviting visitors to IBA 2012 to stop by at Booth 570, Hall A5 to use its exclusive new Nutrilac® calculator and find out for themselves how much they could save. The calculator simply requires the user to input their annual egg usage to receive an instant – and confidential – indication of the potential savings available to them.

The data generated by the calculator is based on the average price of liquid whole egg from September 2011 to August 2012, as provided by commodity market analysts Urner Barry.