More egg packers have cut their producer prices following the recent decision by the United Kingdom’s biggest packing company, Noble Foods, to cut prices for the second time this year.
Packers say they are coming under increasing pressure from retailers for reductions following falls in the cost of animal feed. Yet at the same time there are reports that the egg market is much tighter than expected at this time of the year. Whilst supermarkets that are battling to hold back the threat from rival discounters are pressing for cuts, tight supplies are exerting upwards pressure on the egg price - leaving some observers bewildered by current market trends.
Noble initially reduced prices by five pence per dozen from the beginning of February on the back of falling wheat and soya prices, followed by other packers, including Fridays, Glenrath Farms and Yorkshire Farmhouse Eggs. Stonegate and Anglia finally did so after initially maintaining prices, but Noble has since made another five pence cut. Fridays and Chippindale Foods have now also announced reductions in the prices they pay to producers.
Fridays have reduced payments by four pence per dozen on average and Chippindale Foods has made a three pence cut. Peter Chignell, Chippindale’s operations director, said the decision was the result of a combination of factors, including retail pressure and the reduction in the cost of feed. “We have paid a lot of increases to producers over the last couple of years that have not been funded by the market,” said Peter. “Obviously retailers have seen feed costs coming down and they want to see some of that recovered.”
Harry Irwin at Anglia Free Range Eggs also said that suppliers were coming under pressure from retailers. “They see that feed prices have come down. It is the first thing that is mentioned when you walk into a room - it is the topic of choice at the moment. And it’s not just eggs,” said Harry. “We probably won’t be doing anything this month, but something will probably happen in September or October. We can’t ignore what Noble’s have done.”
However, L J Fairburn is still saying it feels no need to cut prices at the moment. “It is all right looking at the feed price today, but how many egg producers have bought forward,” said Sarah-Louise Fairburn. “We know what people need to make to get a living out of eggs because we produce eggs ourselves. Everybody in the chain needs to be able to make a margin. We will not be cutting prices at the moment. If we do at some point it will be relative.”
The family firm probably benefits from the fact that it runs a vertical operation. The Fairburns rear their own pullets, they have 1.78 million chickens, two packing centres and they also produce their own feed in their own mill.
But Sarah-Louise says that one of the main reasons for the family’s ability to maintain producer prices is their low administrative costs. “We are a really lean, efficient operation. And we as a family do not take money out of the business. The money we make goes back into the business,” she said.
Yorkshire Farmhouse Eggs is making no further move to reduce producer prices at the moment. Adrian Potter told the Ranger that he had seen the market for eggs tightening. “It’s very tight at the moment. There was a bit of a glut at one point but it has pulled back and consumption seems to be up.”
Adrian Potter’s report of a tight egg market was echoed by Barry Jackson at Egg Uk, who said that the market was much tighter than it should be at this time of the year. “There are supposed to be 35 million birds out there and it is August so there should be more egg around, but there isn’t. I have been waiting for the market to fall off a cliff and I thought it was starting to happen a few weeks ago, but then it turned again and people are finding it very difficult to find the egg they want. There has either been a huge increase in consumption or there are not the number of birds out there we think there are. It is very difficult to explain what is happening,” said Barry.
He said there were conflicting pressures on the egg market at the moment because supermarket buyers could see that feed costs were down, they were all scrapping for market share and they would be increasing the pressure on suppliers to reduce prices. He said he could understand it when packers were saying that they were under pressure on prices because of a reduction in producer costs.
“But on the other hand, when you go on to the open market and start trying to find egg for customers, and there is no egg to be had, then the pressure is on to pay more to get it,” said Barry. He said costs were down, on paper there was a record number of birds and August was traditionally a slow month for eggs. Yet the market was way above where it should be on paper at the moment.
