Egg price rise hopes crushed

The packers organisation NEMAL has crushed hopes of an increase in egg prices for beleaguered free range producers with a warning that its members are looking to cut costs still further because of oversupply in the egg market.

Producers have been hoping for improved egg prices to offset the huge increase they have seen in feed costs. BFREPA costings indicate that free range egg producers are currently losing £5.82 on every bird, with organic producers losing £6.08 per bird. But NEMAL (National Egg Marketing Association Ltd) has told BFREPA chairman John Retson that there will be no increase in egg prices.

The revelation came during a recent meeting between John Retson the BFREPA chairman and other members of the BFREPA Council and representatives of NEMAL, the organisation that represents 80 per cent of Lion packers. John was so concerned by what was said during the meeting that he has taken the unusual step of writing directly to all BFREPA members.

"Such was the shock of the information provided by the packers that I felt I needed to write to you all personally. The reality of the meeting highlighted that the egg market, including free range, is still chronically over-supplied, both at retail and wholesale levels. More worryingly official chick placement figures show that this oversupply situation could remain with us until the middle of 2012, unless radical action is taken. The oversupply situation represents an astonishing 3 million laying birds," says John in the letter, which went out shortly before the Ranger went to press.

NEMAL representatives told John that packers would not be in a position to fund an egg price increase for the foreseeable future. On the contrary, packers were looking at ways of reducing their costs still further.

"They stated that there is an overall downward pressure on their selling price, so much so that the cage sector is in the middle of an early depletion programme, which should bring them into balance by the end of the year," says John in the letter. " We were advised that the free range sector also needs to play its part to address the oversupply problem by reducing bird numbers as soon as realistically possible."

He says, "Such a decision we know will not be taken lightly and will lie with individual members, and any contract or commitment to the pullet rearer will also need to be considered. However, our understanding is that a reasonable cancellation notice period of 20 weeks or more before the anticipated housing date would allow the pullet rearer to cancel chicks and stand rearing space empty."

BFREPA has warned the packers repeatedly about the difficulties free range producers are facing. John Retson has also written twice to all the major supermarkets highlighting the crisis facing free range egg producers. The first letter was written jointly with Charles Bourns, chairman of the NFU Poultry Board. A second letter signed by John alone went to individual retailers and to the British Retail Consortium. He has called for a long term commitment to the supply chain.

"The price of wheat and compound feed has gone steadily upwards at an alarming rate with wheat prices reaching in excess of £200 per tonne," he said in his latest letter to the supermarkets. "These increases have pushed up our cost of production by 20p per dozen on compound feed alone. If we look at our industry standard costing it shows every free- range egg producer losing £5 for every bird he or she has in lay at the present time. These losses are indeed unsustainable.

"As an organic egg producer and pullet rearer myself, I can assure you that we are starting to see real damage being done to the supply chain, damage that will have a lasting effect. There were over 1 million chicks cancelled in the fourth quarter of last year and I understand there have been nearly 200,000 pullets cancelled since the start of this year," he said.

There have been indications of supermarkets increasing egg prices in their stores. Sainsbury has increased the price of six free range woodland large eggs from £1.63 to £1.68. Ten Happy Eggs have increased in price by 24 pence from £2.59 to £2.83.

Whilst latest Defra statistics show that UK packing station throughput increased by just under 10 per cent in 2010 compared with 2009 (about eight per cent when the figures are adjusted to account for a 53-week statistical period in 2010), the British Egg Industry Council has reported a huge increase in egg sales. The BEIC has announced record egg sales for the final quarter of 2010. It says the UK egg market has grown to heights unseen since the salmonella crisis in the 1980s.

The last quarter of 2010 saw a five per cent year-on-year rise in volume sales of eggs – one of the biggest periods for growth in recent years. The BEIC says the total egg market grew overall by 1.6 per cent in volume and 2.6 per cent in value in 2010, building on recent successive years of continued growth, following decades of year-on-year declines.

It says that positive health news, including the fact that eggs have been deemed a superfood by scientists, has helped the retail egg market to grow by some 70 million eggs to 4.6bn eggs. Eggs’ excellent value for money in the current economic climate is also believed to be having a major impact.

The figures, which were produced for the BEIC by TNS Superpanel, show that free range egg sales continue to drive both retail volume and value, although cage egg sales have stabilised after several years of decline.

Although NEMAL remains gloomy about chick placement figures, Defra statistics show a year-on-year fall in commercial layer chick placements in December. The 2.8 million chicks placed in December 2010 represented a decrease of three per cent on the same month in 2009. And because December 2010 was a five-week month compared to a four-week month in the December 2009 statistics, adjusting the figures to achieve a like-for-like comparison shows a 22 per cent fall year-on-year. These figures are likely to show up in the layer flock by the middle of the year.

Despite November’s figures showing a year-on-year increase of six per cent in commercial layer chick placements, there were decreases of 13 per cent and 20 per cent for September and October respectively. These reductions should now be showing up in the number of commercial layers.

In the mean time feed prices are continuing to rise. John Retson believes that there may be another £20 per tonne still to come prior to harvest. He says that if producer prices remain static then losses will continue to mount.

It seems that free range egg producers will continue to feel the financial squeeze for the foreseeable future.