Will retailers pocket extra egg cash?

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The big four retailers have finally increased the selling price of free range and organic eggs in what was expected to be the first step in achieving a lift in producer prices.

But producers' enthusiasm for the move has been tempered by the apparent reluctance of the multiples to hand over extra money to the packers.

Tesco led the charge with a pack of six free range eggs going up by 10p on Very Large, 5p on Large and 8p on Mediums. That roughly equates to an extra 13p for every dozen free range eggs Tesco sells. The retailer increased the cost of its organic eggs by around 20p a dozen. Asda, Sainsbury's and Morrisons quickly followed with similar increases.

But when the Ranger contacted Tesco to ask if part of the increase would be handed over to packers, who in turn could then pay producers more, Tesco declined to comment.

The packers would only say that "negotiations were in process" but one source close to the packers told the Ranger that negotiations were "extremely tough going" with little desire on the part of the retailers to hand over any of the extra cash.

BFREPA chairman Tom Vesey has hit out at the retailers saying: "We have been pushing for retail prices to be increased ever since prices were slashed earlier this year. For retailers to more than reverse that price drop and then start stalling when it comes to paying suppliers more is totally unacceptable."

Both Asda and Tesco reduced packs of six Large and Medium free range by 4p in January. Sainsbury's and Morrisons took less drastic action but still reduced a pack of Large by 3p and 4p respectively.

"This latest increase in shelf prices has swelled the coffers of the retailers when the main purpose of the move should have been to get money passed back down the supply line as fast as possible," said Tom. "Our members are now losing money on every dozen eggs they produce and the future is looking pretty bleak unless we get a sizeable increase. A couple of pence a dozen certainly won't be enough."

The latest edition of BFREPA's costings show that once-profitable free range farms have been turned into loss-making enterprises. It is calculated that producers are now losing nearly one pence a dozen and it is a situation that threatens to get worse with feed prices continuing to increase.

Producers have already seen the cost of compound rations rise by up to £5 a tonne over recent weeks and further increases are predicted, possibly as much as another £10 which is equivalent to 2p a dozen.

"The concern is that when producers do finally get some more money it will be swallowed up by extra feed costs," said Tom Vesey. "So that's why we're pushing for a 5p increase at the very minimum."

Tom believes that a shortage of free range eggs is looming fast.

"We have continually warned retailers that low profitability in the free range sector was leading to a lack of investment in new production facilities which would eventually materialise into a shortage of eggs.

"That scenario is now only just around the corner and the blame lies squarely with the supermarkets."