Egg shortages force producer prices up
Fridays have announced a major increase in the price they pay free range producers for the eggs.
The packer’s producers have been told that prices are increasing by seven pence for very large, large, medium and small eggs and by 10 pence for seconds and farm seconds. Fridays said that increases would take effect from March 11.
Free range producers were informed of the increases in a letter from operations manager Martin Flegg. He said in the letter that the market was currently being driven by a lack of availability of colony eggs.
"This was predicted last year and we had hoped that it might have impacted sooner," he said in the letter. "But it seems that there is now some intent in Europe to catch up with the few member states, such as the UK, who are compliant. The free range egg market is less oversupplied than previous due to other packers cascading free range eggs into colony along with supermarket promotions and some producers delaying restocking their pullets."
Martin said that rises from supermarkets were currently confined to colony egg. "To date we have only had success in raising colony eggs prices to supermarkets. Therefore our producer price increase is temporarily supported almost entirely by this. We hope free range selling price will rise soon."
He said, "As an egg producer ourselves we know the pressures you are under and that you need this help now. We hope that the market will continue to strengthen, enabling us to continue to improve returns to our producers.
"In the meantime we thank for your patience through this very difficult time and we thank you for your loyalty and trust."
Stonegate has increased prices for Columbian Blacktail producers by four pence across all grades, whilst an increase announced by Noble Foods covered just small eggs and seconds. Noble producers were informed of the increase in a letter from contract producer and farms director Tom Willings. He said that prices would be increased by three pence per dozen on seconds, farm seconds and smalls from March 3, although he suggested that free range egg sales were falling as a result of the economic climate.
"The retail market over the last year has seen unprecedented levels of competition, with increased promotional activity and like-for-like deflation in egg prices," he said in the letter. "Added to this, the recent decline in free range sales has continued due to displacement by cage egg as retailers respond to changing consumer habits in the teeth of the wider economic gloom. At the last 52 week data set, the category represented 54.6% by volume within supermarkets, but has fallen to 51.8% over the last month."
In his letter to producers, Tom Willings said, "The rapid rise in wholesale prices since January reflects a shortfall of UK-produced colony cage egg, even though volumes of free range remain available. As you know, we trade only minimal volume in the wholesale sector; our focus is the retail market. As was seen last year with our producer price sustained throughout an extended depression in the wholesale market, retail and wholesale values are not closely linked. However, activity in the lower tier is indicative of the general conditions within the market as a whole, and as such, we are deep into the process of extensive customer price negotiations."
He said the increase announced by Noble was the result of an improved market for processing. He indicated that there may be a "more substantive base price increase" yet to come from the company.
John Retson, chairman of the British Free Range Egg Producers’ Association, has repeatedly written to major supermarkets to warn that the sustainability of the United Kingdom’s high welfare free range production would be put in jeopardy unless producers received a significant increase in the prices they received for their eggs. Many free range producers have been suffering heavy losses as a result of high feed prices and low egg prices.
John’s latest letter followed reports that some major retailers had been hit by supply shortages. He said in the letter, "I am reliably informed that last week some retail egg orders could not be fulfilled due to egg shortages and I know this is caused by colony bird numbers dropping significantly since 1/1/12, coupled with the continuing departure of free range egg producers from our industry.
"Unless the price for eggs paid to free range egg farmers increases immediately and significantly, it is a sad fact that British consumers will go short of British free range eggs on retail shelves."
The NFU subsequently joined BFREPA in calling for a significant and immediate increase in prices.
NFU poultry board chairman Charles Bourns said the supply chain should recognise the "seismic shift that is taking place right now in the egg market" and ensure that the British free range egg industry retained its ability to invest in the future.
"Egg producers have responded to both legal requirements and market demand over the years by converting to new enriched cages and free range production, making significant investments in the process," he said.
"Many have borrowed serious amounts of money to invest in new buildings in the run up to the conventional cage ban. Producers have been struggling to meet capital repayments and run profitable businesses. We know the market has been affected by oversupply until recently, but there are very clear signs it is now on the turn. Free range producers need to see a significant increase in the price they receive that reflects the cost of production and allows future investment and innovation in businesses in the future. As it stands, the majority are making a loss and this is now unsustainable."
He said, "British egg producers have made genuine financial and professional commitments to delivering what consumers want in terms of higher welfare egg production. Now is the time to see those commitments repaid by the rest of the supply chain.
"Retailers in particular need to think about the long term security and future supply of British free range eggs and avoid the risk of irreparable damage being done to the free range egg supply base by not getting the market signals right now."
Recent figures show a significant improvement in wholesale egg prices. On March 3 the price for medium free range eggs was up to £1.45 pence from £1.35 on February 24. Large eggs were up from £1.50 to £1.60 and small were up from £1.10 to £1.20. Very large were £1.75 on March 3.
