From The Poultry Site

JAMAICA – The Fair Trading Commission (FTC) has ruled that Caribbean Broilers (CB) Group’s entry in the table egg market is unlikely to crowd out other players.

The Gleaner reports that the decision followed complaints by the Jamaica Egg Farmers Association Limited (JEFA), who feared that the large company, which is also a supplier of layers or pullets as well as chicken feed, would have an unfair advantage over small farmers.

The FTC concluded that CB’s expansion into the egg market is “unlikely to lead to a substantial lessening of competition”.

Its decision was made in March but came to light in the annual performance report published by the Ministry of Investment, Industry and Commerce.

JEFA President Roy Baker said Tuesday that the association has not received any official communication on the FTC’s decision, and was unaware up to then that a ruling had been made.

“I am surprised they have taken that position. In our own view, we still believe and believe strongly that it is not good practice and it could not be fair competition with the supplier of the pullets and the supplier of the feed being in direct competition with the egg farmers,” Baker told Wednesday Business.

CB Group head of corporate affairs, Dr Keith Amiel, said Monday that his company was basically taking advantage of openings in the retail market and that its intent was to eliminate the “stop-go” availability of table eggs – a reference to intermittent shortages of the protein on retail shelves.

Caribbean Broilers is substantially in the business of poultry, but it also produces other meats and animal feed.

The company, which is owned by the Hendrickson family, made a serious play for a share of the egg market with the acquisition of the Chippenham Park egg farm in 2011, and launched a campaign to raise local consumption above the prevailing average of one egg per person weekly.

At the time, Chippenham was producing 600,000 dozen eggs in a market of some 11 million dozens.

CB predicted, however, that the market for table eggs would grow to 20 million dozens over time.

One of the company’s early initiatives was ‘Smart Eggs’, which has higher omega fatty acids content.

“On the face of it, CB’s participation in the table egg market suggests that it had adequate incentives to adversely affect competition in the market for table eggs; further, CB’s participation in the pullet market suggests that it would have some opportunity to adversely affect competition in the market for table eggs,” said the FTC decision.

“All other things equal, if CB could increase the price paid by small farmers for pullets, it would make the margin sufficiently small to weaken its competitors in the market for table eggs. The focus of the assessment, therefore, was to determine whether CB is likely to have sufficient opportunity to increase the price small farmers pay for pullets.”

The main finding of the assessment was that the other major supplier of pullets, Jamaica Broilers, has the capacity to serve a sufficiently large number of the small farmers who would likely switch if the price of pullets sold by CB rendered them uncompetitive in the market for table eggs.

“This means,” the FTC said, “that small farmers have a reasonable alternative supplier of pullets and, therefore, had the opportunity to avoid any substantial price increase which might be imposed by CB. Ultimately, this would mitigate attempts by CB to weaken competition in the market for table eggs.”

JEFA rejects the rationale

“The FTC saying that there is an alternative supplier is not sufficient, not good enough. We are speaking about unfairness in the sense of a market which has an extremely small margin. Farmers have found it very difficult to move prices,” Baker said.

Additionally, feed represent 75 per cent of egg production costs, he said.

Amiel said Chippenham’s egg production has increased markedly, but that CB mainly serves the hotel sector, including properties owned by the Hendricksons.

“The company has hotels, restaurants and supermarkets to sustain and the quality has to be as good as anything else, raising everything to match international standards,” said Amiel, referring to CB’s egg market.

“Every morning in every hotel, one has to serve bacon and eggs – eggs with everything. They have to be available where and when the tourists require them. They also have to be available at breakfast time in homes across the country. We found that consistent supplies and supplies of quality were inconsistent,” he said.

Local egg consumption has risen about 20 per cent above 2011 levels, but that it remains at no more than one per person per week, which means the population needs 500,000 layers per year, Amiel told Wednesday Business.

Caribbean Broilers produces 150,000 for distribution to small farmers, while “the other main company” does 300,000, said the CB executive, referring to rival Jamaica Broilers Group, which is controlled by the Levy family.

“Those who thought we would create a glut by producing more eggs are not in this real world, but from some colonial, poor backyard farmer approach to living. That is not where we are at,” said Amiel.

The corporate affairs manager also denied that its egg production business is getting feed from the company’s grain centre – Nutramix – at a concessionary rate, saying that the feed subsidiary operates in itself as a profit centre.

The national flock of layers ranges between 450,000 and 520,000 hens, and 90 per cent of egg farmers purchase “ready-to-lay pullets”, according to the JEFA website.

The website also indicates that there are approximately 500 egg farmers with capacity ranging from 25 to 60,000 hens, and that industry is valued at J$1 billion.

For more on this story go to:

http://www.thepoultrysite.com/poultrynews/29587/ftc-clears-caribbean-broilers-in-egg-market-fight