Free range egg producers are being encouraged to consider depleting flocks early in response to the current over-production in the egg market.
Egg producers have been hit by falling prices as a result of a temporary imbalance in the egg market. Earlier this year BFREPA chairman John Retson said the industry needed to control the rate of expansion in free range, and major packers have announced that they have temporarily closed their books to new producers. Most observers are still optimistic about the future of free range, but John Retson believes that egg producers can help themselves by adopting measures to help bring the market back into balance.
"I think these prices are going to be with us for a little while, so I think we should be a bit proactive by, for instance, depleting early," he said. "But I don’t think that is all bad. If we plan it properly we could all save a bit of money in our turn-rounds – by employing less contract labour and maybe doing some extra work ourselves instead of contractors. I think it would not be as negative as some people would say.
"I will be suggesting to BFREPA members that it is something we should be considering, but the people who could drive this are the packers. I am hoping the packers are going to say, ’Well, maybe if there is a bit of support for it then maybe it would be difficult to implement but it might help’," said John.
Fridays told us that early depletion was a measure they were already using for cage flocks. They were currently looking at the option of introducing it for free range. Both Noble and Stonegate have told Ranger that they would support the move.
"It is something we would support because there is no point producing something that you are selling, potentially, at lower than the cost of production," said Martin Troop of Noble’s. "I think there is far more work to be done in terms of the mechanism for effecting it – in terms of making it fair across the producer base – but it is certainly something that we would support."
Richard Kempsey of Stonegate said, "We would support a number of measures, including early depletions to get the numbers down."
Richard Kempsey warned at the Pig and Poultry Fair in May that the time was close when the doors would be closed to new producers. Shortly afterwards Stonegate closed its books to new entrants. Noble says it has stopped taking on new producers at the moment. And John Bowler has also announced that he will not be issuing any new contracts to produce free range eggs for at least the next nine months unless market conditions change. He said, "I feel the free range market is here to stay and I feel the demand for free range eggs will continue to grow, but possibly not at the pace at which it has recently grown."
One organisation that has already started depleting early is Sunrise Eggs. Chris Stocks told the Ranger that three of the firm’s own flocks had been depleted early. Those three flocks comprised 40,000 birds. He said Sunrise had also halted building plans for two new units at the moment.
"It is an easy thing to carry eggs whilst the market around you is good," said Chris, who as well as having his own flocks also takes eggs from other producers. Those other producers have some 200,000 birds in production. "If you are not utilising eggs into retail and the market for wholesale eggs and for seconds is reasonable then you are not going to lose your shirt; you are just going to lose the buttons off it, maybe. But as soon as it got the way it did after Easter, it was a completely different picture.
"I think everyone knows now what sort of levels we have seen and continue to see. The cage market dropped incredibly. It went to 60p, something of that order. That’s a hell of a drop for cage eggs. Free range eggs have been sold and continue to be sold in place of cage eggs. To sell them at those levels, which are unsustainably cheap, you have got to do something about it rather quickly. As producers in our own right, we are masters of our flocks and we can decide what to do with them and when. It seemed the most obvious immediate answer," said Chris, who said that one of the flocks had been depleted at under 60 weeks.
Of the two new builds that had been halted, one development had reached the stage of having the concrete base put down. The other was in the planning stage. "That was five flocks we decided on in the space of about five days."
Chris conceded that a new producer or a small scale producer may not be as ready to deplete early because of personal financial implications. "A typical recent entry producer has hocked himself up completely. He has borrowed on the promise of some decent returns – which there have been; the market has been very kind to us all. If he has spent half a million pounds and borrowed a good lump of that then he will be unwilling to take birds out because he has based his programme on full term.
"Unfortunately, everything is about timing. If some of these fellas don’t get hold of it now and bite the bullet they may not be around for another term. They really ought to be looking now, instead of repaying in the period they thought, adding a little more time to that and paying it off more gently because the returns are not going to be as good as they were. It’s nobody’s fault individually. It’s just the way we have all timed it. There has been a lot of ambition out there, if you want. Unfortunately the market has taken away the support that was there."
Chris said he believed that the problem would be temporary but he said that producers planning new developments should put them on hold. "Pull over and wait a while rather than dive in," he said. "If you can do that you might get a better return later. Anyone thinking of putting extra flocks in should leave it a while."
Stewart Elliott of Eggsell is another supporter of early depletion. He would like to see packers take the lead in pushing the measure. "While producers may be loathe to do it on an individual basis, I think it almost needs some pressure from the packers to say, ’Look, I am sorry but you will have to do this’," he said.
"It is not a complete loss for producers. Yes, it is a drop in income but so is a price drop. But you would have more time to clean the shed out. You would hope that would give you a better chance to kill all the bugs and bad things and, particularly at this time of year, to get your range in order – re-sowing of grass and that sort of thing. There is chance to disinfect when you clear out and disinfect again. It’s a chance to really hit any problems you are encountering.
"If you are getting towards the end of the hens and you are getting, probably, in this weather quite a lot of white eggs or something like that that are going into seconds, the actual amount of Class A egg is probably going down anyway. You could justify going on because the pullet is paid for and all you are having to pay for is feed and electric and labour, but the most important thing at the moment is to get egg off the market place."
He said the sooner the industry got the amount of egg down, the sooner the market would recover.
