Current plight of egg producers 'desperate'
Desperate is how British Egg Industry Council chief executive Mark Williams described the current plight of egg producers when he addressed delegates at Pig and Poultry Live.
Mark, who says there are currently three million too many layers in production, conceded that the British egg industry had made mistakes in allowing the market to become oversupplied, and he said that rising input costs had made matters worse for egg producers. ’The industry got it wrong. Getting it wrong on the supply side is one thing, but getting clobbered on feed prices is the thing that tipped the balance.’
Mark said that the volume of egg sales was increasing. It had increased by 0.6 per cent in the first quarter of this year and he expected that, looking ahead, it would increase by between one and 1.5 per cent per year, but value had been going down. ’Retailers have got a big price war going on at the moment and they don’t want to pay much for what they buy from their suppliers.’ He said that in a free market supply and demand ruled the roost and the egg industry had expanded too much.
Members of BFREPA are well aware of the financial crisis facing free range egg producers. The association’s costings indicate that producers are losing more than ’5 on every hen as a result of reduced producer prices and soaring feed costs. Mark Williams said that it was new entrants to the industry who had been particularly badly affected by the financial problems hitting the industry at the moment.
’Those who have come into the industry in the last four or five years have gone to the banks and borrowed an awful lot of money on the basis that ’these are the returns I am going to get’,’ he said. ’Now is the difficulty, isn’t it? We are seeing with the market place at the moment that losses are being made ’ with despair, there is no other way to put it. If you have diversified you can offset it against some of the other farm enterprises. Those people who have been in it from the beginning, I would argue, have made good money. Let’s be honest about that. I feel sorry for any producer who is losing money at the moment, but the newcomers, particularly, are the ones who are hurting very, very badly at the moment.’
Mark said that in the months ahead the industry needed to sort out the oversupply in the market and address the high price of feed. Retailers were reluctant to do so but they would have to increase prices for producers or there would not be a UK production base to supply them with the eggs they needed.
Despite the difficulties in the current market, Mark pointed to some positive signs. ’We have about three million too many hens, which is probably 10 per cent of production, but that is going down very quickly now. We reckon that our current laying flock is at thirty five and a half million and is going downwards because of early depletions and not actually filling up sheds as well. We hope to get our supply and demand back into balance much quicker.’
Mark said there were also hopeful signs from the continent. In the first half of last year there had been huge expansion, particularly in Poland and Spain, but in the second half of the year when prices started to go down production had been cut back. ’Europe’s oversupply problems will sort themselves out faster than ours and that is very good news because it means we will not get the same pressure at wholesale level, which holds prices down.’ However, he said that the German and Spanish flocks had not yet peaked. The UK received a lot of eggs from Spain and they could still affect the UK market, although he added, ’The signs are good. It’s going the right way.’
Mark was asked specifically about the prospects for free range eggs, particularly in light of the recession and the move from conventional to enriched cages. He said, ’Free range is here to stay in this country. It is no longer a niche. How can 50 per cent of an industry be a niche. What I think you will see, and it is already happening, is differentiation within the category.’ He pointed to Waitrose’s Colombian Black Tail producers who were paid a premium.
He said supermarkets were driven by margin and they were going to make more margin on a free range egg than a caged egg. ’Because free range is such an integral part of our industry at the moment it will continue to grow, probably at the expense of cage if the truth be known, but you see brakes. We saw the brakes going on free range expansion in 1990-91 when we had the last recession.
Instead of that growth it levelled off, but it didn’t go down. With this recession we were seeing cage going down but it started levelling off. But that is obvious. As consumers have less money to spend they are going to look a bit more carefully at price and what they do.’
Mark spoke about the forthcoming EU ban on conventional cages and reiterated his estimate that some 29 per cent of hens on the continent would still be housed in conventional cages when the ban came into force on January 1 next year. He highlighted figures that indicated 50 per cent of Spain’s hens would be illegal when the ban began, 60 per cent of Italy’s hens, 50 per cent of Poland’s hens and between 20 and 25 per cent of France’s hens. He said that if those hens continued in production after the start of the ban it was vital to ensure that the eggs did not reach the United Kingdom.
He said the UK Government fully supported the view that an intra-EU trade ban should be introduced to prevent illegal eggs leaving the states where they were produced. UK MEPs had also been making a lot of noise on the issue and had had some success in gaining support in Brussels.
He said there would be difficulties in policing the ban because there would be no inspections at ports. He indicated that the greatest concern involved trade in egg product and the aim was to embarrass potential customers who may want to import egg product that could prove to be illegal. The British Egg Information Service is currently running a campaign targeting foodservice and food manufacturing sectors. It asks, ’Will your egg supplies be legal in 2012’ and it encourages them to use Lion egg product to ensure that they are not using illegal products.
Mark said the industry was making a lot of headway with foodservice and manufacturing companies. ’We still have a long way to go but we have 10 processors and six of them are now Lion egg processors. Two more are on the way in.’ He said that the campaign warning about 2012 and the threat of illegal egg was having some effect.
