Over-supply blights free range market
While cage and barn egg producers have seen an uplift in the price paid for their eggs, large surpluses continue to prevent any increase in the free range price.
Heavy promotional activity is reported to have led to an improvement at retail level in the cage and barn egg sector. In conjunction with the impact of early depletion of cage flocks and lower chick placings—along with an improving market on the Continent—packers have been able to return an extra 3p a dozen to cage and barn producers.
But packers still report large surpluses of free range and, for the first time ever, this summer has seen significant parcels of free range eggs failing to find a buyer. While some of this egg has been mopped up by the processing industry, it has had to compete with free range eggs imported from Europe, a development first revealed in the Ranger back in June.
“The egg market has endured difficult trading conditions this year but hopefully the situation is beginning to improve,” David Tromans, managing director of Deans Foods, told the Ranger.
“We are working to obtain further returns from the market in all sectors which, coupled with the ongoing industry efforts to get the market into better supply/demand balance, should lead to improved returns in due course.”
Despite the current surplus of free range eggs, Deans—which has taken on a considerable chunk of new production—stands by its recruitment strategy.
“We have planned our supply base around what we consider to be reasonable forecasts but it is impossible to be 100 per cent accurate,” says Mr Tromans.
“It has to be remembered that production now coming on-stream was first planned as far back as 2003. Retailers continue to show interest in growing their non-cage egg sales and we have to be in a position to meet new demand.”
Deans has recently reviewed its long term view of the market and while last year the company was predicting it would be 2012 before free range sales volumes equalled those of the intensive sector, that date has been brought forward to 2010.
The latest data from retail analysts TNS shows a year-on-year slump in total egg sales of 1.5 per cent but during that period free range and organic have increased their market share by over 9 per cent and 6 per cent respectively, at the expense of cage eggs. Free range now represents 30.8 per cent of retail sales while organic can lay claim to a 3.3 per cent share.
Reflecting the shrinking cage egg market is Deans’ decision to close its packing operation at Seamer, North Yorkshire, along with the cage units which supply the centre.
Staff facing redundancy have been told that the company is “producing too many cage eggs”. Earlier this year Deans halved its capacity at its Scottish packing centre and closed its packing operation at Dereham in Norfolk.
David Tromans said the latest closure was regrettable but would lead to the company’s packing operation being focussed on a small number of modern, cost-effective packing centres giving national coverage to all major retail groups in the UK.
Free range needs another 4p
The free range producer price has been on the slide for 12 months and while some of the reductions since last August have been related to lower feed costs, BFREPA has calculated that a minimum increase of 4p a dozen is required to fully restore profit levels.
Association executives have already met with the packers to discuss pricing and chairman Tom Vesey commented: ”It is difficult to argue for more money when the market is awash with eggs but, on the other hand, the current producer price is not sustainable in the long term.
“Current margins leave nothing for reinvestment and ultimately that means future supply levels are at risk if the situation doesn’t improve.”
