16-12-2013 15:07 PM | News, Poultry

Producers warned on overheated free range egg market

Egg broker Barry Jackson is concerned that the free range egg market could become overcooked later in the year unless producers tread very carefully.

Barry, who runs Egg UK, says that the free range egg market is looking fairly healthy for producers at the moment, but fears that supplies could get out of balance because of the number of attractive deals on offer to producers. "I think the next three or four months are in the groove, looking at the placings and so on that are there at the moment, but I am just concerned that, with a bit of instability, there might be a bit of egg inflation," he said.

Barry said he was worried that the increased number of packers competing for producers may well lead to an eventual oversupply in the free range market. "With new packers desperately looking for egg and offering deals for egg, on the one hand the market is telling us that we have enough egg and enough production to meet enough egg, and on the other hand are producers being given the impression that there is a whole load of new opportunity out there for increased production across the board?"

He said he felt that producers may be inadvertently getting the wrong impression that there was a "great big black hole" in the market that needed filling with new producers. "I don't think that's true. My fear, and I think the phrase has been used by other people, and I think it is a very good phrase, is something called egg inflation. It is this inflationary feel that we have got to do more, that there is more opportunity to put birds in because there are very good offers from producers that have got no resemblance to a published producer price. There are deals being offered to encourage producers to move - to throw current contracts in and to move their egg across to meet what they see as a very opportunistic need in the market place. It just concerns me that we may be creating the wrong impression that could impact in the second half or half way into the second half of the year," said Barry, who said his fear was that the market could end up with too much free range production as a result of the offers.

He said there was no sign of such a thing happening at the moment and he had no hard evidence pointing to the possibility of it happening. Barry said his fears were based on a gut feeling. "You have got producers out there who are being approached by a number of packers with very attractive prices to try to tempt them away from current arrangements. If that happens it could send out the message that there is a huge need for new egg, for alternative egg. I fear that could lead to extra chicks being placed this year. That could very, very quickly cook the market and kill it stone dead."

Barry said that, as a broker or trader, it made no difference to him whether eggs were 20 pence or £2 per dozen, but it made a very big difference to the fortunes of producers. "If there is a lot of egg around then suddenly you are everybody's best mate because they need a home for the egg at whatever price," he said. "Then you can really drive a good bargain for your customer, but the producer or packer gets a kicking. On the other hand, if there is a good healthy market the role is reversed and I find myself being courted by customers to look for egg and find egg for them at a good price. That way everybody benefits, I suppose you could argue."

Barry said that producers were pretty OK at the moment. Feed bills were lower than they had been for a long time and the market was pretty good. Everybody was happy. But the market was such a finely balanced one that it was so easy for a "little bit of irresponsibility" to filter through and "a little bit of greed to kick in, frankly" and mess things up completely. He said that the free range market, more than ever before, was becoming a commodity market, just like the battery egg market used to be.

"You have got these peaks and troughs all the while," he said. "The first half of last year was bloody horrible. You had very high feed prices, you had producer prices under threat, and then that gets very quickly forgotten post August. The market turned on a sixpence, everybody was suddenly short of egg and they forgot about the first half of the year," said Barry. "Then you get other packers offering red hot prices, upsetting everybody."

Barry said that opportunistic and irresponsible recruitment could well lead to egg inflation, and he said it was something about which the major multiples should also be concerned, not only producers and others in the egg industry. Overproduction would do no-one any good because it would simply create a bounce in the market.

"Whatever the free range egg market looks like now, it could look very different in the second half of the year," he said. There was a very healthy balance in the market at the moment, the wholesale market was good, there was firm demand, there were opportunities out there, but the free range egg sector had to make sure that the market did not become overcooked.


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