Five pence increase needed now, says BFREPA

BFREPA is calling for an immediate rise in producer price of five pence a dozen. The call came earlier this month when Association executives met with the packers' organisation, Nemal, to discuss the unrelenting rise in feed costs.

The cost of feeding layers has increased by around £25 a tonne since producers received a 10p lift in the packer price last October, effectively wiping out half that increase.

"At the time the increase looked sufficient because we were optimistic that feed costs would level-off," commented BFREPA chairman Tom Vesey. "Regrettably that hasn't been the case and within a matter of months producers are once again facing severe financial hardship."

And with feed costs predicted to continue rising between now and harvest, Tom is concerned that a 5p rise may not prove enough.

"Five pence is the very minimum we need and it could prove to be insufficient if the gloomy predictions for feed prices prove correct," added Tom. "On top of this is the knock-on effect of feed costs on pullet price as well as the burden of spiralling fixed costs, particularly fuel and power."

The latest costings produced by BFREPA, which were presented to the packers at the meeting, show that on average producers are now losing nearly 50p on every bird, after taking into account the full range of production costs, including labour and depreciation.

"In the short-term producers have proved adept at weathering economic storms simply by living off the depreciation on their investment and by providing their own labour at an unrealistic charge," says Tom. "But it is not a sustainable position and it certainly doesn't create an environment which will encourage newcomers into the sector.

"Couple that with existing producers now talking about not restocking houses and it all points to a shortage of free range eggs not only now but it raises huge concerns for Christmas supplies as well. Let us hope this is not a repetition of Christmas 2006 when the packers started asking for an increase from the retailers in March of that year but it wasn't forthcoming."

BFREPA got a sympathetic hearing at the meeting, with packers agreeing to the need for an increase. However, packers warned that it would not be easy to achieve. Retail egg prices are currently at an all-time high and there is likely to be little appetite from retailers to increase the amount they pay for their eggs. Add to this the ongoing battle between supermarkets for customer share and it could make for tough times around the negotiating table.

But what is stacked in favour of the packers is a dramatic tightening of the free range market in recent weeks. Surpluses that were washing about have now disappeared and with it the offer of any cheap packages of eggs. Packers say it is too soon to attribute the sudden lift in demand to any one particular factor, but no doubt publicity surrounding the Hugh Fearnley-Whittingstall and Jamie Oliver TV campaigns has had an effect, along with Pancake Day which is increasingly being viewed by the egg industry as having a big an impact on demand as Easter.