Noble to control 6 out of 10 hens
If Deans and Stonegate are given the green light to merge then the new giant packer will control 60 per cent of free range egg production in Britain.
The dimensions of the two companies' dominance over the free range industry emerged as BFREPA gave evidence to the Competition Commission inquiry into the creation of Noble Foods.
The BFREPA analysis of the market showed that currently Deans has contracted supplies from 322 producers and 4.5 million free range and organic birds. Stonegate contracts cover 800,000 birds but the company also takes the entire egg supply from the John Bowler organisation which accounts for a further 1.2 million birds.
This means that Noble Foods controls production from six out of every ten of the hens on range in the country.
By comparison five companies in the "second division" of packers control just one million birds between them. And the largest of these has 300,000 birds. This makes Noble, in terms of production numbers, over 20 times bigger than its nearest competitor.
Association chairman Tom Vesey and vice-chairman John Widdowson both appeared before the CC investigation panel at a hearing in London.
They presented an Association view, reported in last month's Ranger, that while the merger has the potential to bring improved efficiencies that could lead to extra revenues being passed back to producers and improved price stability there were also major concerns that hundreds of producers now had no choice at all about where they sold their eggs.
The CC panel—which has to make a final decision on this crucial balance—wanted to know how the arguments stacked up in the minds of the BFREPA leaders. They were told "The jury is out".
The panel also asked how BFREPA members viewed the merger. "We are all concerned, we have no reason to be anything but concerned," said Tom Vesey. "We have said the jury is out; we are not damning it and we are not supporting it. We are saying 'let's wait and see'."
The panel explored how easy it was to expand egg production. They were told that it could take up to two years to get planning permission, construct buildings, acquire pullets and produce eggs. And with costs running at £20 a bird and flock size now expected to be around 12,000 birds the investment is now huge for a family farm.
Questions were also asked about the role that Noble Foods could be expected to play in trade associations such as BFREPA and BEIC; on the importance of the Lion scheme; and on the balance between welfare and economics.
The inquiry panel members also asked about how price levels were fixed and how often prices to producers were changed. They also wanted to know why, if eggs were in short supply and the lead-in time on expansion was so long, did producers not have a strong bargaining position for increases in prices.
John Widdowson told the inquiry group that the 18-month period which producers had recently gone through without price movement was the longest he could remember. And the three pence increase which ended it would have been consumed by increases in feed costs by Christmas.
The panel asked whether Noble Foods would be in a position to insist producers trade with them in ways other than the supply of eggs, such as buying feed and pullets and the processing of spent hens, and how producers would view such a move.
The BFREPA team was also asked to consider the scenario of Noble Foods losing a major contract with one of the large supermarkets. If this order were then handed to another packer how would producers react? If the CC decides that the merger cannot go ahead as planned one of its options would be to order Noble Foods to divest itself of some of its business, creating just this scenario.
More free range news at www.bfrepa.co.uk
