Packers cut prices to curb expansion

An over-supplied eggs market and a slowing down of retail sales is being blamed for a cut in producer prices by the country’s top two packers.

The drop comes following a sustained period of growth in the free range market but despite a three per cent year-on-year growth in sales, packers say that retail uptake of all eggs has been sluggish over the last six months. With both Deans and Stonegate reporting surplus free range, the producer price cut is being seen as sending out a signal that current expansion needs to be curbed.

“Over recent months we have seen the supply of free range eggs exceeding demand,” said Stonegate’s commercial director, Nick Rogers, in a letter to producers. “This has had a serious effect on the wholesale market which has seen substantial price drops.

“We believe it is in the long-term interest of the market as a whole that further expansion in the free range supply base be checked.”

Stonegate dropped their price for free range by two pence a dozen and Deans came down a similar amount both on free range and organic. Deans handed out more severe cuts to their cage and barn producers.


Commenting on the packers’ recruitment activity over the last twelve months, Mr Rogers told the Ranger that in reality it can take up to two years from an initial enquiry to eggs coming on stream.

“It is very difficult to accurately forecast sales over that period of time,” he said, “and there are bound to be occasions when supply gets ahead of demand.

“But we are confident of future growth in free range sales and our producer pricing strategy has always been based upon long-term sustainability. We have, for the past twelve months, adopted a consistently cautious approach to the free range market. “While price cuts are never popular, by taking this action now it will hopefully avoid more drastic steps further down the line.”

While Deans accept that much of the problem is being caused by an over-supplied cage market throughout Europe, it is impacting on free range, says managing director David Tromans.

According to Mr Tromans the wholesale value of eggs has halved over the past year, resulting in a 30p a dozen price reduction for the 25 per cent of the company’s throughput that fails to end up on a supermarket shelf.

“In the last six months retail sales have lost ground also creating surpluses of non-cage eggs,” he said, “which although relatively small are extremely expensive when they can only be cleared at very depressed cage market prices. The overall cost on our business is enormous and we cannot continue to bear the full weight of it.”

But, speaking to the Ranger, Mr Tromans confirmed the confidence that exists in the long-term future of free range.


“I think the whole egg market is in for a bumpy ride over the next few months but certainly as far as free range is concerned, everything points to strong growth.

“Our recent recruitment drive has been geared around our long-term forecasting.”

One packer who has not dropped its price—and is still recruiting—is Fridays, whose operations manager Martin Flegg told the Ranger: “We believe our producer prices will remain the best available from any major packer.

“Prior to this news from Deans and Stonegate we had hoped that prices might remain stable to the end of the year. But if our competitors are sourcing product cheaper and this disadvantages us in the market we may be forced to review our situation.”

Nick Chippindale, of Yorkshire-based packer Chippindale Foods Ltd, said the company would be reluctant to trim its producer price at a time of year when the demand for eggs is traditionally strong.

“But the reality is we cannot afford to be out of line with the rest of the market and may have to follow suit,” he said.