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21/08/2010 15:54:52
Egg producers face hardship as prices tumble
The bad news just seems to keep coming for free range egg producers as the major packers introduce further cuts. Stonegate and Fridays both confirmed to the Ranger that they had cut prices whilst producers across the country have been receiving letters from Noble Foods informing them of a further cut of 5 pence per dozen.
We were unable to obtain an official response from Oakland although one producer told us that he was expecting a letter from the company with details of another cut in the rate.
The latest moves comes on top of price cuts introduced in June, and the new reductions will come as a blow to free range egg producers. Whilst the price producers receive for their eggs is falling, huge increases in the price of wheat because of drought in Russia threaten to send the cost of feed soaring. Lower returns and higher feed costs will squeeze producers still further.
Packers have been cutting prices because of the large volume of egg on the market. John Retson is urging producers to consider early depletion in an effort to help restore balance to the egg market. He has previously called on the industry to exert some control over the number of new entrants to the industry and major packing companies have since closed their doors to new producers for the moment.
Stewart Elliott of free range egg co-operative Eggsell says that all the leading packers are looking to reduce prices. He said the problem for the packers was the current low level of the wholsesale price. "Normally a packer can run 20 per cent over and know that he can get rid of egg if he needs to. It is very different at the moment because the wholesale price is so low," said Stewart.
In June Oakland led the way with a 10p per dozen cut in the price it pays to producers. The company warned at the time that the price could be reduced still further unless the number of new entrants to free range egg production was brought under control. In a letter to its producers, the company said the market was "completely flooded" because of the increase in the number of new free range producers. It said that unless the "massive expansion of free range production" ceased, the company envisaged another 10p cut being implemented in August or September this year.
Although we have received no official response from the company, we understand that another reduction was being prepared as the Ranger went to press. One Oakland producer told us that he was expecting a letter from the company with details of the latest price cut.
Stonegate followed Oakland with a cut of five and a half pence on average. The new prices came into force on June 13.
The company has now introduced another reduction. The price for standard free range eggs has been reduced by another eight pence.
Fridays have just reduced their prices by eight pence per dozen for first quality and 10 pence per dozen for second. Noble Foods reduced prices by six pence per dozen on average in June and now a further 5 pence per dozen.
Most people in the industry are expecting that the future for free range egg production is a positive one, although Stewart Elliott suspects that producers may not see all of the recent reductions restored once the market is returned to balance.
"Now the packers know that there is enough egg about, they don’t need to chase the producers. There has been money paid to producers purely so that producers stay with them or come to them, and I can well see a general tightening up," said Stewart, who said he thought about five pence was built into the price to retain or attract producers. "Whether the packers will make more money and the producers not as much I don’t know."
Tony Burgess has called for more accurate industry statistics so that future trends can be predicted and controlled. This is where DEFRA/Animal Health come in. The Egg Marketing Inspectors should be able to provide this, although there is talk that in some areas Egg Marketing Inspectors jobs are being cut.
One producer told the Ranger that nobody in the industry seemed to be aware of how many sheds were going up at any one time and the implications this would have on the supply of egg going forward. "There are still a lot of sheds going up which means there is still expansion."
Some producers are demanding to know where the money is going. ’It certainly is not coming off the egg price in the supermarket’ says one producer. "My unit is now making a loss and that is unsustainable. Why don’t the packers just turn away new production? Why were they not turning away new production months ago? It is in nobodys interest to have free range producers making a loss. Maybe BFREPA should lobby the supermarkets to put pressure on the packers as this will ultimately impact on them."
Another member told the Ranger "Packers may have stopped advertising but there are still producers in the pipeline. One thing is sure and that is the anger amongst producers with these decreases inevitably creating a lot of hardship. Most producers have borrowed heavily on the back of the promises the packers gave. The packers now have a responsibility to treat those producers fairly. Cutting the price twice within a few months as a result of their mismanagement is not fair."
"What we need to hear is what packers are doing to correct the problems they have created. At what stage are they stopping new producers from entering the market. Before a spade has been put in the ground? Before the shed has been ordered? Before the pullets have gone in? There are still new producers who have not yet started production still on the books of some packers. Having this and putting the price down is simply unacceptable. Some packers just seem to be putting the price down and blaming the wholesale market. The wholesale market is not the problem. It is the result of the problem. The problem is the packers mismanagement of the need for egg and their over aggressive chasing of new producers."
BFREPA Chairman John Retson has written to all the leading packers to stress producers concerns regarding the price reductions. The letter highlights BFREPA members grave concerns at the continuing drop in packer to producer egg prices. These are coming close to the cost of production and in some cases are already under the cost of production.
As well as this, producers are facing rises in wheat prices that they cannot possibly absorb on the price structure of eggs at the moment. Egg prices in some cases are down more than 16p and feed costs rising to the equivalent of an extra 6p per dozen leaving the producer 22p per doz worse off.
It would appear that supermarket prices have not dropped in comparison to producer prices and consumer demand has not reduced significantly. We would therefore be grateful if you could help us explain to our members why their prices have been cut so drastically and where the price differential is going?
If this squeeze on producer prices continues there will be production units that decide to give up egg production or be forced to give up through bankruptcy, which could create a shortage of free range eggs in the future. Surely, whilst we understand that long term oversupply should not be encouraged, it cannot be the intention of yourselves or the supermarkets to irretrievably damage the experienced free range egg supply base which has been carefully built over many years? This may unfortunately be the result of the current egg pricing policy unless it is reversed before too long.
 | Egg producers are battling against reducing packer prices and increasing feed prices |
We were unable to obtain an official response from Oakland although one producer told us that he was expecting a letter from the company with details of another cut in the rate.
The latest moves comes on top of price cuts introduced in June, and the new reductions will come as a blow to free range egg producers. Whilst the price producers receive for their eggs is falling, huge increases in the price of wheat because of drought in Russia threaten to send the cost of feed soaring. Lower returns and higher feed costs will squeeze producers still further.
Packers have been cutting prices because of the large volume of egg on the market. John Retson is urging producers to consider early depletion in an effort to help restore balance to the egg market. He has previously called on the industry to exert some control over the number of new entrants to the industry and major packing companies have since closed their doors to new producers for the moment.
Stewart Elliott of free range egg co-operative Eggsell says that all the leading packers are looking to reduce prices. He said the problem for the packers was the current low level of the wholsesale price. "Normally a packer can run 20 per cent over and know that he can get rid of egg if he needs to. It is very different at the moment because the wholesale price is so low," said Stewart.
In June Oakland led the way with a 10p per dozen cut in the price it pays to producers. The company warned at the time that the price could be reduced still further unless the number of new entrants to free range egg production was brought under control. In a letter to its producers, the company said the market was "completely flooded" because of the increase in the number of new free range producers. It said that unless the "massive expansion of free range production" ceased, the company envisaged another 10p cut being implemented in August or September this year.
Although we have received no official response from the company, we understand that another reduction was being prepared as the Ranger went to press. One Oakland producer told us that he was expecting a letter from the company with details of the latest price cut.
Stonegate followed Oakland with a cut of five and a half pence on average. The new prices came into force on June 13.
The company has now introduced another reduction. The price for standard free range eggs has been reduced by another eight pence.
Fridays have just reduced their prices by eight pence per dozen for first quality and 10 pence per dozen for second. Noble Foods reduced prices by six pence per dozen on average in June and now a further 5 pence per dozen.
Most people in the industry are expecting that the future for free range egg production is a positive one, although Stewart Elliott suspects that producers may not see all of the recent reductions restored once the market is returned to balance.
"Now the packers know that there is enough egg about, they don’t need to chase the producers. There has been money paid to producers purely so that producers stay with them or come to them, and I can well see a general tightening up," said Stewart, who said he thought about five pence was built into the price to retain or attract producers. "Whether the packers will make more money and the producers not as much I don’t know."
Tony Burgess has called for more accurate industry statistics so that future trends can be predicted and controlled. This is where DEFRA/Animal Health come in. The Egg Marketing Inspectors should be able to provide this, although there is talk that in some areas Egg Marketing Inspectors jobs are being cut.
One producer told the Ranger that nobody in the industry seemed to be aware of how many sheds were going up at any one time and the implications this would have on the supply of egg going forward. "There are still a lot of sheds going up which means there is still expansion."
Some producers are demanding to know where the money is going. ’It certainly is not coming off the egg price in the supermarket’ says one producer. "My unit is now making a loss and that is unsustainable. Why don’t the packers just turn away new production? Why were they not turning away new production months ago? It is in nobodys interest to have free range producers making a loss. Maybe BFREPA should lobby the supermarkets to put pressure on the packers as this will ultimately impact on them."
Another member told the Ranger "Packers may have stopped advertising but there are still producers in the pipeline. One thing is sure and that is the anger amongst producers with these decreases inevitably creating a lot of hardship. Most producers have borrowed heavily on the back of the promises the packers gave. The packers now have a responsibility to treat those producers fairly. Cutting the price twice within a few months as a result of their mismanagement is not fair."
"What we need to hear is what packers are doing to correct the problems they have created. At what stage are they stopping new producers from entering the market. Before a spade has been put in the ground? Before the shed has been ordered? Before the pullets have gone in? There are still new producers who have not yet started production still on the books of some packers. Having this and putting the price down is simply unacceptable. Some packers just seem to be putting the price down and blaming the wholesale market. The wholesale market is not the problem. It is the result of the problem. The problem is the packers mismanagement of the need for egg and their over aggressive chasing of new producers."
BFREPA Chairman John Retson has written to all the leading packers to stress producers concerns regarding the price reductions. The letter highlights BFREPA members grave concerns at the continuing drop in packer to producer egg prices. These are coming close to the cost of production and in some cases are already under the cost of production.
As well as this, producers are facing rises in wheat prices that they cannot possibly absorb on the price structure of eggs at the moment. Egg prices in some cases are down more than 16p and feed costs rising to the equivalent of an extra 6p per dozen leaving the producer 22p per doz worse off.
It would appear that supermarket prices have not dropped in comparison to producer prices and consumer demand has not reduced significantly. We would therefore be grateful if you could help us explain to our members why their prices have been cut so drastically and where the price differential is going?
If this squeeze on producer prices continues there will be production units that decide to give up egg production or be forced to give up through bankruptcy, which could create a shortage of free range eggs in the future. Surely, whilst we understand that long term oversupply should not be encouraged, it cannot be the intention of yourselves or the supermarkets to irretrievably damage the experienced free range egg supply base which has been carefully built over many years? This may unfortunately be the result of the current egg pricing policy unless it is reversed before too long.
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