BFREPA resists pressure to drop egg price

Association officials have made a strong case to the packers for maintaining the producer price at its current level in the face of mounting pressure from retailers for a cut in egg prices.

The exchange of views came at a meeting held earlier this month between BFREPA (British Free Range Egg Producers Association) and the packers"e; organisation Nemal. Commenting after the meeting, Association chairman Tom Vesey said: "It is clear that the packers are under increasing pressure from retailers to drop prices but our message to the packers is that there is no justification for this at present."

With retailers themselves under pressure due to everyday shopping items being hit by unprecedented levels of inflation, it appears egg buyers see falling wheat prices as the signal for cheaper supplies of at least one staple item.

But the reality is that lower wheat prices have so far had very little impact on finished ration prices because nearly every other ingredient, particularly soya and phosphate, has rocketed in price over the last 12 months.

"The result has been that so far layers rations have dropped by less than £10 a tonne for a lot of producers," says Tom. "And when you consider that egg price increases over the last 12 months have failed to keep pace with feed and pullet costs, any talk of a drop in egg price at this stage is premature. Furthermore, the indications are that whilst we may see a further reduction in the cost of feed, it isn"e;t going to be as dramatic as we would have hoped.

"A tonne of layers"e; meal is still costing around £80 to £90 more than it was at the beginning of last year and pullets have risen by around 60p over the same period, not to mention increases in fixed costs such as fuel and power. Our members desperately need the egg price to be maintained if they are to stand any chance of offsetting these extra production costs."

Costings presented at the meeting by BFREPA show that even after taking into account this month"e;s lower feed price, the margin free range egg producers can expect after labour and depreciation charges is still only 63 pence per bird.

"That represents a return on capital of less than three per cent," says Tom, "and that"e;s a figure that producers are going to be looking at very closely in the future because there"e;s going to be a massive need for growth within the sector to replace at least some of the birds that will be coming out of cages in 2012.

"Existing producers who may be considering expanding to meet that demand, along with potential new entrants, will only take the plunge if it is worthwhile financially."

Commenting after the meeting, vice-chairman of Nemal, Peter Kemp, said: "It was a productive meeting and the figures supplied by BFREPA will prove useful in any discussions between packers and retailers."