Egg producer price reduced by two major packers

Two of the major packers have cut payments to producers just two months after increasing their rates on the back of increased feed costs. But Stonegate has so far resisted the temptation to follow the lead of Noble. It is sticking to the prices it set in June and says it will continue to monitor the situation over the coming weeks.

Noble was the first to announce a cut, saying the reduction was because feed prices had now fallen back again. Fridays has followed Noble’s lead, and although BFREPA chairman Tom Vesey said he was disappointed by the cut in prices.

Noble has reduced payments by 3p per dozen on very large eggs, 3p on large eggs and 1p on medium eggs. The reductions equate to a weighted average cut of 2p per dozen. Martin Troop said, "Feed prices have gone down every bit as much if not more than they went up." Despite that, the current reduction announced by the company was lower than the increase Noble introduced in June, he said. That increase amounted to a weighted average of 3.17p (1p on large and 7p on medium eggs). "We are trying to be sensible about it and offer a fair price for producers’ eggs."

Fridays responded to Noble’s announcement by introducing the same cuts in payments – 3p on very large, 3p on large and 1p on medium, although Martin Flegg said the company was still offering better terms than its rivals. "We have also felt the need to drop the payments, but we still maintain a considerable premium over other major packers."

Richard Kempsey at Stonegate said his company was "aware of the drivers in the market at the moment" – mainly the price of feed – but Stonegate would continue to monitor those drivers rather than increasing prices now. "We are not immediately following Noble. We will review things over the next few weeks."

Although the increased payments introduced in June followed sharp increases in feed prices, the decision to raise payments was also linked to a growing concern amongst packers about future egg supplies. There will be a need for expansion within the free range egg sector to help fill the gap created by the ban on conventional cages in January 2012, and Tom Vesey said it was one issue packers should consider before cutting producer payments.

He said that packers needed to take account of the investment producers would be needed to make in the industry. The ban on conventional cages, the increase in external stocking densities and the reduction in internal stocking densities for longstanding free range producers would all increase pressure on producers to invest to meet increased demand for free range eggs. Payments were one way of encouraging such investment.

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