The chairman of the British Poultry Council (BPC), John Reed, has warned that higher feed prices are here to stay.
His warning came during a speech at the Egg and Poultry Industry Conference (EPIC) last month, when he said, "Volatility in feed commodity prices is likely to continue, but from a higher base line."
He said, "Feed prices are not going to return to the kind of levels most of us here were used to when we were growing this industry over the last 20 or 30 years. Our challenge is to handle the volatility better. This means using more sophisticated risk management tools and requires the co-operation of the whole supply chain, including retailers."
The message to retailers was reinforced by Mark Williams, chief executive of the British Egg Industry Council (BEIC) during his speech at EPIC.
He said, "There are producers in this room and out there in our industry who are suffering very badly at the moment. All I would implore, because I guess that this will be reported wider than me talking to you today, is that the market needs to react, it really does, or we are going to find ourselves with big potential problems with supply."
John Reed said that climactic conditions this year had caused crops to fail in varying degrees around the world. This would happen again in the future, possibly more frequently, more dramatically, and climate change and water
shortages would continue to hit crop yields.
The new Agriculture Minister, David Heath, said that whilst the European Commission believed that a good South American harvest was likely to improve the price and availability of feed stocks going into 2013, climate change and the risk of more unseasonal episodes of weather meant that the country would need to "develop a plan B" for times when supplies were short.
"This is why, as a Government, we spend millions of pounds each year on research projects which can help with resource efficiency," said the Minister.
"The 369 million chickens slaughtered in Britain in 1973 needed just over one and a half million tonnes to feed them. Today, the same amount of feed will support 527 million birds - a 42 per cent increase. These improvements came from boosting fertility and improving disease resistance, from developing new skills and applying the latest scientific knowledge. These are things that have helped to reduce costs, reduce demands on resources and improve competitiveness."
The Minister said it was vital that UK consumers were able to access and afford a balanced, healthy diet. He knew that British agriculture was under considerable pressure at the moment. Food prices were a major issue for many families, but British farmers were also seeing their costs rise.
"I know that you have pressures of your own whilst trying to keep prices affordable for consumers. I know that feed costs are a great concern for you all. Forecasts are that they will remain volatile and put pressure on your margins."
But John Reed said it was not only poor climate that was forcing up the cost of feed. He said that the use of food crops for bio fuel
was also having an impact on the availability and price of feed ingredients.
"We live in quite a different world now. Our industry is competing with subsidised bio ethanol and bio diesel, which is driven by government policies in north and south America and here in Europe. Bio fuel
now takes 40 per cent of the US corn crop and an even greater share of EU rape oil. It's projected it will take about three million tonnes of UK wheat. That's almost the same amount of wheat as the UK poultry industry consumes.
"All this underpins and pushes up commodity prices, challenges our businesses and makes the days of cheap food just a memory," said John Reed, who said that, with world population increasing and more people demanding a protein diet, he believed it was unsustainable to create a bio fuel
industry based on food and feed crops.
He said he was pleased to see that the EU was now reviewing its bio fuel
support policy. The US poultry industry and the International Poultry Council were pressing other governments to do the same.
Peter Charlton, vice chairman of Europe for Alltech, said the use of grains in the ethanol industry had been around for decades in the United States, but one of the last pieces of legislation put in place by president George Bush committed the country to producing 20 per cent of fuel
from renewable sources.
"Renewable sources in America is ethanol from grain," he said. "If they are going to hit 20 per cent by 2020, and a lot of people in this room will say that is madness, that cannot happen, that will use 300 to 350 million tonnes of grain. That's the US grain
harvest, full stop. Yes, it's madness and it's great to see the Europeans bringing more flexibility to biofuels, but it is there today."
John Reed said that the EU's policy towards GM feed was also a problem for the poultry sector.
He said that Brazil and Argentina had previously synchronised their licensing of GM varieties of soya, corn and wheat with that of the EU. "Now they don't bother.
They are starting to grow GM varieties not yet licensed in the EU. China imports roughly the equivalent of Argentina's entire soya crop each year. Why would they worry about the EU's fears and hang-ups with GM."
Peter Charlton said the feed industry in China today amounted to some 100 million tonnes.
The figure had doubled over the last 10 years.
"It's been estimated that if the Chinese people, on average, were to eat the same per capita meat protein consumption that the Americans do, then you would need a feed industry in China somewhere in the region of 600 or 700 million tonnes," he said. "When their feed industry talks about adding growth, they are not talking about adding 10 per cent or 20 per cent, they are talking about doubling the number of feed mills they are putting in place."
The poultry sector is unique in the United Kingdom in that many leading retailers still insist on the use of only non-GM feed.
The poultry industry has been pressing for this restriction to be lifted, to bring poultry into line with rules for other livestock sectors.
Duncan Sinclair, agricultural manager of Waitrose, told EPIC delegates that his company was aware of the potential problem ahead in sourcing non-GM feed.
He said any decision to abandon the requirement for the poultry industry to use only non-GM feed would be taken by the Waitrose board, but he felt it was an issue that was likely to come to a head in the next year.