FFTC Agricultural Policy Platform (FFTC-AP)

ABSTRACT

This study reviews the relevant literature on Japan’s egg-washing regulations and the operational mechanisms of its grading and pricing systems. Through in-depth interviews, it systematically analyzes and compares differences between Japan and Taiwan in institutional design, supply chain structure, and egg price-formation mechanisms, and proposes policy recommendations to promote an egg-washing, grading, and pricing system in Taiwan. The results indicate that Japan’s system is characterized by three core advantages: supply chain integration, the linkage between quality grading and pricing, and strong policy support. In contrast, Taiwan still faces several challenges, including a relatively low egg washing rate, the lack of quality-based pricing, and high market price volatility. Based on these findings, this study recommends establishing a pricing system anchored in farm-gate prices, initially adjusting prices based on shell integrity after washing, and subsequently allowing individual egg washing and grading facilities to introduce differentiated pricing mechanisms based on factors such as weight, quality, traceability, or CAS certification, and farming practices, according to their distribution channels and market demand. In addition, it suggests strengthening contract farming mechanisms, upgrading washing and cold chain infrastructure, implementing comprehensive traceability systems, and promoting supply chain integration to enhance industry competitiveness, price stability, and food safety standards.

Keywords: egg industry, pricing mechanism, contract farming, supply chain integration  

INTRODUCTION

Eggs are a key source of dietary protein, and the stability of their supply and quality directly affects consumer prices and food safety. However, in recent years, Taiwan’s egg market has been affected by factors such as avian influenza outbreaks, rising feed costs, and production-sales imbalances, leading to frequent price fluctuations and recurring supply–demand mismatches. These issues highlight structural problems in the current industry system, particularly in supply chain management and price formation mechanisms.

Several key challenges exist in Taiwan’s egg industry. First, the egg washing rate remains relatively low (approximately 33%–40%), and a large proportion of unwashed eggs continue to enter traditional markets, breakfast shops, and restaurants, increasing food safety risks. Second, the grading system is based solely on weight, with quality not incorporated into pricing mechanisms, resulting in high-quality eggs failing to reflect their true value and weakening producers’ incentives to invest in quality improvement. Third, price formation relies heavily on spot market mechanisms and lacks institutionalized adjustment tools, making egg prices overly sensitive to supply–demand changes and prone to sharp fluctuations. Fourth, the supply chain structure is fragmented, with a low proportion of contract farming, and egg washing facilities vary significantly in scale and equipment standards, making it difficult to establish consistent quality management and pricing systems.

In contrast, Japan’s egg industry demonstrates a high degree of institutionalization and integration. Through entities such as agricultural cooperatives (JA), egg grading and packing centers, and agribusiness firms, Japan has established a supply chain centered on contract farming. This system is supported by comprehensive washing processes, a dual grading system based on both weight and quality, and a transparent pricing mechanism, resulting in an egg washing rate exceeding 99% and relatively stable prices. Essentially, this represents a “system-oriented industry,” in which standardized grading, contractual relationships, and policy support create a stable linkage among quality, price, and supply. By comparison, Taiwan’s current system is more “market-oriented,” with prices primarily determined by short-term supply and demand, weak linkage between quality and pricing, and a lack of medium- to long-term contractual mechanisms to stabilize supply.

Based on the above background and problem analysis, the objective of this study is to review the literature on Japan’s egg washing regulations and the operational mechanisms of its grading and pricing systems. Through in-depth industry interviews, the study systematically analyzes and compares differences between Japan and Taiwan in institutional design, supply chain structure, and egg price-formation mechanisms, and proposes policy recommendations to promote an egg-washing, grading, and pricing system in Taiwan.

THE EGG WASHING, GRADING, AND PRICING SYSTEM IN JAPAN

Japan and Taiwan are both island-based economies, with egg production sectors dominated by small- and medium-scale farms. They also share strong similarities in their industrial development history, consumption patterns, and food safety requirements. In both countries, consumer markets place high importance on egg quality and food safety, and governments play a key guiding role in institutional design and industry development. Under this context, Japan’s egg washing, grading, and pricing system demonstrates strong institutional comparability and provides valuable policy insights.

From a supply chain perspective, Japan’s egg industry has developed a highly standardized and institutionalized operational system. Its core features include a well-established washing system, rigorous grading standards, and a transparent price formation mechanism, making it an important benchmark for the global egg industry. Currently, more than 99% of eggs available in the Japanese market are washed. This high washing rate is not the result of a single mandatory policy, but rather the outcome of the interaction among regulatory frameworks, industry self-regulation, distribution channel requirements, and consumer preferences. In particular, the high standards for quality and safety imposed by distribution channels have gradually made washing and grading basic entry requirements for the market.

It is worth noting that the development of egg Grading and Packing (GP) centers in Japan has not been driven by compulsory government equipment standards, but rather by market mechanisms and industry demand. As large-scale retailers have raised their expectations for product quality and supply stability, cooperating GP centers have continuously improved their sanitary conditions, automation levels, and quality-control capabilities. In this process, the government provides policy support and subsidies, while Japan Agricultural Cooperatives (JA) play a crucial intermediary role in integrating egg farmers, strengthening contract farming relationships, and facilitating resource allocation, thereby jointly promoting the upgrading and optimization of the overall industry system.

Based on the above, this study systematically reviews Japan’s regulations related to egg washing and its grading and pricing systems. It further examines case studies, including contract-based washed egg systems in Kagoshima and Hokkaido, as well as the vertically integrated production and marketing model of Yasuhara Sangyo Co., Ltd. Through these cases, the study analyzes contractual relationships, price formation mechanisms, supply chain operation models, quality management practices, and policy support measures, providing important references for institutional reform of Taiwan’s egg industry.

Regulations related to egg washing in Japan

Japan does not have a single mandatory law requiring all egg producers to wash eggs. However, any eggs sold on the market must comply with hygiene and quality regulations established by the Ministry of Health, Labour and Welfare and the Ministry of Agriculture, Forestry and Fisheries. These include the Japanese Agricultural Standards (JAS), the Enforcement Regulations of the Food Sanitation Act, the Hygiene Management Guidelines for Egg Grading and Packing Facilities, the GP Center Hygiene Management Standards, and the Egg Trading Standards Guidelines (Hung, 2021).

Egg washing, grading, and pricing system in Japan

Japan’s egg washing rate exceeds 99%, which can be attributed to several key factors: (1) a stable contract farming system and a highly integrated supply chain; (2) the widespread implementation of washing processes, supported by a high degree of automation and a comprehensive cold chain system, enhancing food safety and consumer trust; (3) a well-defined grading system that adopts a dual-track approach based on both weight and quality, facilitating the development of high value-added products (such as eggs for raw consumption); and (4) a transparent pricing mechanism that helps stabilize market prices. Among these factors, the stable cooperative relationship between contracting entities and egg farmers is one of the most critical drivers behind the high washing rate. The contract farming system is designed to prevent sharp market price fluctuations, stabilize production scale, improve egg quality, promote long-term cooperation between farms and contracting entities, and ensure stable income for egg farmers.

In terms of contracting entities, Japan primarily includes three types: JA, GP centers, and agribusiness firms. JA is responsible for contract management as well as the procurement and allocation of eggs; GP centers directly sign contracts with farmers, specifying supply quantities, quality requirements, and weight grading standards; while agribusiness firms often operate vertically integrated models, managing everything from production to washing and grading. As for contract contents, they typically cover the contract period, delivery quantity and frequency, product specifications and quality requirements, pricing mechanisms, quality assurance, and performance-based incentives and penalties. Both parties also agree in advance on how to handle force majeure events (such as disease outbreaks or natural disasters), as well as necessary inspection and biosecurity obligations, to ensure smooth cooperation. If farmers fail to meet agreed supply volumes or quality standards, they are required to bear corresponding compensation liabilities. Furthermore, Japan’s contract system places particular emphasis on biosecurity and disease prevention; concealing outbreaks or violating biosecurity regulations resulting in serious consequences is also considered a breach of contract.

The procurement pricing mechanism in contract farming is legally grounded in the Egg Trading Standards Guidelines, which provide the basis for egg weight and quality grading. Accordingly, this study offers a detailed explanation of these regulations. Under the Guidelines, eggs in Japan are primarily classified by “net weight per egg (including the shell),” with weight grading serving as the core standard, supplemented by quality inspection criteria and labeling requirements. This system aims to protect consumer rights, promote fair trade, and enhance overall egg quality.

First, with regard to weight grading, eggs in Japan are categorized into six classes based on each egg's net weight: Extra Large (LL), Large (L), Medium (M), Medium Small (MS), Small (S), and Very Small (SS). This system enables clear product differentiation in the market, thereby improving distribution efficiency and price transparency.

Second, in terms of quality grading, eggs are evaluated based on both external appearance and internal quality, and are classified into four categories: Premium, Grade A, Grade B, and Substandard (off-grade eggs). Through this quality grading system, Japan can establish differentiated pricing based on quality levels, thereby reflecting product value and encouraging producers to improve quality. The specific grading standards and evaluation criteria are presented in Tables 3 and 4.

Table 1.   Contractual contents of egg production in Japan

Source: Organized by this study.

Table 2.   Egg quality grading in Japan

Source: Egg Trading Standards Guidelines (Japan).

Table 3.  Egg Quality Inspection Criteria in Japan

Source: Egg Trading Standards Guidelines (Japan).

Table 4.  Comparison of pricing mechanisms and supply chain management models of washed eggs (Kagoshima, Hokkaido, and Yasuhara Sangyo Co., Ltd.)

Source: Organized by this study.

INDUSTRY INTERVIEWS AND KEY TOPICS IN TAIWAN

In 2025, there are 98 egg washing and grading facilities in Taiwan. Based on raw egg procurement volume as the selection criterion, 27 facilities are identified as large-scale operations, accounting for over 70% of the market share. This study adopts a qualitative research design, employing semi-structured interviews to gather perspectives from these 27 domestic eggs washing and grading facilities in Taiwan. The interviews were conducted from August to November 2025. The interview outline focuses on  topics including farm cooperation models, farming practices, poultry house types, egg grading standards, procurement pricing mechanisms, distribution channels, and recommendations for government support.

INTERVIEW RESULTS

This study synthesizes the results of industry interviews and compares them with Japan’s egg grading and pricing system. The comparison results in Table 5 indicate significant differences between Japan and Taiwan in their egg washing, grading, and pricing systems, reflecting fundamentally different models of industrial development. First, in terms of regulatory frameworks, Japan has a mandatory egg-washing system, with a washing rate exceeding 99% for eggs available on the market. This system is supported by a comprehensive regulatory framework, including the JAS Act, the Food Sanitation Act, relevant hygiene management standards, and the Egg Trading Standards Guidelines. In contrast, Taiwan has not yet implemented mandatory egg washing, with a washing rate of only approximately 33% to 40%. Existing regulations mainly focus on certification and labeling, resulting in relatively weaker institutional completeness and enforcement.

Regarding supply chain structure, both large- and small-scale egg producers in Japan are generally engaged in long-term contract relationships with agricultural cooperatives or related organizations, forming a highly integrated production and marketing system. In Taiwan, however, the industry is dominated by small-scale farms, with a low proportion of contract farming and a more fragmented supply chain. Furthermore, egg grading and packing (GP) centers in Japan are typically located in production or consumption areas and operate at medium to large scales, with a high degree of automation and standardized management practices. In contrast, Taiwan’s washing facilities are more dispersed, vary significantly in scale, and lack consistent automation and operational standards, which affects overall quality control and efficiency.

In terms of grading systems and pricing mechanisms, Japan adopts a dual-track grading system based on both weight and quality, with grading results directly linked to pricing. Through a multi-factor pricing mechanism that incorporates market benchmark prices, weight, quality, contract performance, and traceability, a transparent and stable pricing system is established. By comparison, Taiwan relies solely on weight-based grading, with quality not incorporated into pricing. Prices are primarily determined at the farm-gate level, with adjustments based on factors such as unified flock management practices, hen age (30–60 weeks), use of tray packaging, compliance with packing rate standards (M and L sizes), eggshell color, yolk color intensity, farming methods, and certification such as CAS or traceability labeling.

With respect to packaging and labeling, Japan enforces mandatory labeling requirements for eggs sold in the market, including weight, origin, expiration date, and storage and usage instructions. In Taiwan, only washed eggs sold through modern retail channels are fully labeled, whereas loose eggs in traditional markets lack standardized labeling. In terms of distribution channels, Japan relies on agricultural cooperatives or GP centers for centralized distribution, resulting in a relatively streamlined and efficient system. In contrast, Taiwan has more diverse distribution channels, and a significant proportion of unwashed eggs are still used by the food service, breakfast, and bakery sectors.

Finally, in terms of price stability, Japan utilizes contract farming and institutionalized pricing mechanisms to moderate price fluctuations, preventing prices from immediately reflecting short-term changes in supply and demand. This results in higher transparency and lower volatility. In contrast, egg prices in Taiwan are highly dependent on the spot market and respond rapidly to changes in supply and demand. When supply shortages occur, prices tend to rise sharply, leading to greater overall volatility. Overall, Japan represents a system-oriented, highly integrated industrial model, whereas Taiwan remains more market-oriented, with a relatively fragmented structure, indicating considerable room for future institutional reform.

Table 5.  Comparison of egg washing, grading, and pricing systems between Japan and Taiwan

Source: Organized by this study.

CONCLUSIONS

A comparison of the institutional differences between Japan's and Taiwan’s egg industries indicates that Taiwan’s current system remains largely “market price-oriented,” lacking institutionalized quality management and price adjustment mechanisms. This has resulted in significant price volatility, an inability to effectively reflect quality in pricing, and constraints on long-term industry stability. Therefore, future policy development should focus on “institutionalization, standardization, and supply chain integration,” with reforms implemented in stages. First, with regard to pricing mechanisms, it is recommended to establish a system based on farm-gate prices as the benchmark, with price adjustments determined by shell integrity after washing. Intact eggs should receive a premium of 0.03 USD per jin, while cracked eggs (including hairline cracks) should be discounted by NTD 5 (USD 0.15) per jin. This mechanism would give washed eggs a relative price advantage in the market while also signaling quality risks associated with higher proportions of cracked eggs. Such a system would encourage older flocks—particularly those with higher crack rates following forced molting—to gradually exit the market or transition toward all-in/all-out production systems, with hens culled at around 70 weeks of age. This would help improve the overall quality structure of egg production.

Once the shell integrity-based system is operating stably, egg washing facilities can further introduce differentiated pricing based on factors such as weight, quality, traceability or CAS certification, eggshell color, yolk color, and farming practices, according to their distribution channels and market demand. This would enhance product differentiation and market value. Second, in terms of supply chain structure, the promotion of contract farming should be prioritized. Large-scale egg washing facilities, farmers’ associations, or cooperatives should serve as contracting entities to establish stable production–marketing relationships. By clearly specifying supply quantities, quality standards, and pricing mechanisms through contracts, such arrangements can stabilize farmers’ incomes, strengthen risk-management capacity, and reduce uncertainties arising from disease outbreaks or market fluctuations. Third, regarding production and distribution infrastructure, the government should continue to expand subsidies for egg-washing equipment, automated grading systems, and cold-chain logistics, while gradually increasing the market share of washed eggs. In the medium to long term, egg washing could be progressively established as a basic requirement for eggs entering the market, alongside efforts to enhance consumer awareness of food safety through food and agricultural education. Fourth, with respect to quality management and information transparency, egg washing facilities should assist in implementing comprehensive traceability systems. By integrating HACCP, CAS certification, and production and marketing traceability systems, eggs can be tracked from production to consumption. This would not only enhance consumer trust but also support branding and market differentiation, thereby increasing product value. Through these institutional reforms, Taiwan’s egg industry can be expected to improve price stability, quality competitiveness, and food safety standards, while strengthening its resilience to future supply–demand shocks.

REFERENCES

Hung, C. Y., 2021, An Analysis of Quality Standards, Hygiene Management, and Organizational Regulations in Japan’s Egg Washing System, Research Project Report Funded by the Council of Agriculture, Executive Yuan.

一般社團法人日本養雞協會，鶏卵規格取引要綱chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.jpa.or.jp/chuo_root/gaiyo/gaiyo_20201124_01.pdf。

マルイ農協グルー，Cube Egg，https://www.marui.or.jp/cubeegg/