Egg producers fury at price reduction
Most packers have reduced their buying price for free range eggs in the wake of Noble Foods’ decision to slash its producer price last month.
Stonegate – the UK’s number two egg marketing company after Noble – dropped its prices by a similar amount to Noble bringing the two companies free range price structure roughly into line. Meanwhile, South East-based packer Fridays mirrored the Noble price drop of 10 pence on Very Large and Large and 5 pence on Medium, but it still means the company is continuing to pay producers over 6 pence a dozen more than its two biggest rivals.
In a letter detailing the drop to its suppliers, Stonegate’s producer contracts director, Richard Kempsey, wrote: "We have not led the market but now that other packers have moved with significant price moves we have no choice but to follow the market."
And Stonegate suppliers who produce free range eggs for Waitrose under its Columbian Blacktail scheme took an even harder hit, seeing their price tumble by 15 pence a dozen on the top two grades and 10 pence on Medium. The packer also implemented price reductions for its organic egg suppliers.
"Our market for eggs in the UK during the last three months seems to have followed the worrying trends of the bust financial markets – consumers are trading down, overall egg sales are down and even the egg consumption figures per person don’t look good," explained Mr Kempsey. "As a result of this we have carried surplus in all classes of egg. Add to this the weakening feed raw material market where both wheat and soya have shown significant falls from the recent high pricing and you can understand we are under pressure to move producer prices down."
Stonegate says it will "review producer prices on a regular basis" in relation to prices being charged for finished layer rations.
Some packers, however, have so far managed to stave off price reductions. One of those is Yorkshire-based Chippindale Foods whose operations director Peter Chignell told the Ranger: "Clearly the pressure from the market to reduce our producer price is building and while we reluctantly accept that producer prices will have to fall, we hope this will more closely reflect the real changes in producers costs."
The Ranger estimates that by maintaining its producer price, Chippindale Foods has been paying nearly 10p a dozen more than Noble Foods in recent weeks. Likewise, as the Ranger went to press, the recently formed producer co-operative, EggSell, had not dropped its price which means it too has been paying around 10p more than Noble. However, BFREPA council member and one of the founders of EggSell, Stewart Elliot, told the Ranger that a reduction would be difficult to avoid, although it was unlikely to be of the magnitude imposed by the major packers.
One producer, who asked not to be named, told the Ranger: "When I supplied Deans Foods I was happy in the knowledge that I was amongst the best paid producers in the country. That situation has been turned completely around and Noble Foods’ egg price now ranks amongst the lowest on offer."
BFREPA chairman, Tom Vesey, added. "There is tremendous unrest amongst producers and there is a feeling that Noble Foods – who started this run on prices – have inflicted a cut too deep, plunging producers into dire financial straits.
"In all the years I have been involved in the free range sector, I have never known such anger. It is very unsettling and it doesn’t bode well for future supply levels, which has got to be a major concern at a time when our industry needs to be preparing to meet the inevitable increase in demand triggered by the fast-looming ban on conventional cages.
"It appears our only hope is that feed prices start falling dramatically to offset the effect of this price drop."
*Producers will get a chance to direct questions at Noble Foods’ chief executive, Peter Thornton, when he attends the Open Forum which follows BFREPA’s annual general meeting at Stoneleigh later this month.
