Egg production is expected to drop 4.5 per cent to 955.7 million eggs during 2019-20 as New Zealand bans conventional cages, an industry analyst says.

Producers were in a transition period due to the phasing out of conventional cages by 2022 under the Code of Welfare for Layer Hens which came into effect on October 1, 2018.

In a statement, IBISWorld senior industry analyst Tom Youl said the conventional cage ban had resulted in a sharp decline in egg production.

While the phasing out of conventional cages was expected to benefit farmers producing free-range eggs, consumers would inevitably have to pay more for their eggs.

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Transitioning from conventional cage systems to barn or free-range farms could be expensive, requiring significant capital investment, he said.

Some egg farmers had instead opted to leave the market, contributing to a 14% decline in New Zealand's hen flock in 2018-19.

However, strong demand for eggs had encouraged many farmers to remain or re-enter the egg production sector by investing in new farming systems.

Demand for eggs had been rising over the past decade. However, the increasing demand for eggs, combined with supply constraints, had resulted in farm-gate prices rising significantly.

As a result, operators in the supermarket, grocery and convenience store industry had passed on those price rises to consumers.

An IBISWorld industry report on Poultry Meat and Egg Farming in New Zealand said operators in the poultry meat and egg farming industry were expected to benefit from forecast higher poultry consumption and egg prices over the next five years.

The industry was expected to continue consolidating, with larger players expected to acquire several smaller farms over the next five years to increase production.

Otago-based Mainland Poultry - New Zealand's biggest egg producer - has been most recently developing a large free-range poultry farm south of Moeraki.

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The latest Situation and Outlook for Primary Industries report, released recently by the Ministry for Primary Industries, said the value of live poultry exports for the year to June 2019 was on track to exceed last year's value of $30 million.

China imported most of its white bird meat breeding stock. Until 2014, more than 90 per cent came from the United States but, in January 2015, China banned the import of live poultry from the US due to avian influenza.

Over the next couple of years, China shifted to importing birds predominantly from New Zealand.

Chinese demand for live poultry from New Zealand had been expanding rapidly and other recent major markets like Bangladesh, Indonesia and Thailand had been almost completely crowded out. Those countries were now sourcing their live poultry imports from the US.

In the year to March 2019, New Zealand supplied $26 million worth of birds to China, although that - coupled with birds supplied by Canada and Poland - was insufficient to meet the needs of China's poultry industry and was leading to a decline in breeding stock.

New Zealand poultry production had been steadily growing to meet both domestic and global demand.

Rising production had been largely driven by productivity gains, with slaughter weights increasing 100g - a 5.4 per cent increase - over the past five years.

Poultry exports increased 5.6 per cent during the year ended March 2019 and were expected to be close to $100 million for the year ending June 2019.