BFREPA chairman John Retson has met with representatives of leading packers to press for an increase in producer prices. Shortly after this meeting Noble Foods have informed the Ranger that they are to raise prices by 6p.
Letters are expected to have reached producers by the time the Ranger goes to press.
Martin Troop of Noble Foods told the Ranger that they are working positively with BFREPA recognising the serious impact rising feed prices are having on producers.
"We are predicting continued long term growth and a return to normal prices." said Martin.
John Retson welcomed the rise as "a positive step forward and urged other packers to follow Nobles lead."
The situation with feed prices and too much egg is unprecedented and the industry needs to pull together to ensure free range gets through the recent feed uncertainties.
The Ranger will be watching what other packers are doing and reporting more in-depth in the October issue.
Free range egg producers have seen the prices they receive for their eggs cut substantially in recent weeks. Packers have blamed the reductions on the market becoming oversupplied with eggs, but the price cuts have coincided with increases in the cost of feed – resulting in serious financial difficulties for producers.
John had previously written to packers to highlight the severe hardship hitting BFREPA members. He said that in some cases egg prices were down more than 16 pence per dozen. With feed costs rising to the equivalent of an extra six pence per dozen, he said that many producers were 22 pence per dozen worse off.
John Retson met with the packers and reiterated that producer prices needed to be increased to take account of spiraling feed prices caused by large rises in the price of wheat. "I told them that producers needed an increase to account for their own increased feed costs," said John. "Producers also need an increase to take account of the extra feed costs hitting pullet rearers. Producers are seeing the results of that in increased pullet prices."
He again stressed the need to deal with oversupply in the market, but he told the packers that unless they addressed the financial difficulties of free range egg producers they could well put security of supply at risk in the long term. Packers and retailers needed to ensure that producers would be there to provide them with free range eggs in the years ahead.
The National Farmers Union has also raised concerns about the difficulties facing egg producers because of the rising price of wheat. It says that the prices farmers receive needs to reflect the impact that rising wheat prices is having on the cost of feed.
Rob Newbery, NFU chief poultry adviser, said, "Poultry farmers are highly sensitive to fluctuations in the price of wheat. The cost of growing a chicken or producing a dozen eggs is approximately 60 per cent down to the cost of feed, which is typically 60-65 per cent wheat. A sustained rise in wheat prices will have a direct impact on the profitability of poultry farmers."
Rob said that in 2009 UK production of compound poultry feed was 6.2 million tonnes, of which 3.5 million tonnes was for broilers and 1.3 million tonnes for eggs. The remaining 1.4 million tonnes included turkey and duck production. If wheat made up 60 per cent of the feed, the total feed figure would include 3.7 million tonnes of wheat. That would mean that every £10 per tonne price rise would cost the poultry industry £37 million a year, he said.
"The effect of a £10 per tonne rise in wheat price is approximately three pence on a chicken or 1.5p per dozen eggs leaving the farm," said Rob. "This is hugely significant to poultry farmers operating at extremely tight margins, but it should not result in a significant rise in the price of a supermarket chicken or a dozen eggs. It is essential that any cost increase in producing chicken and eggs is passed up the supply chain."
The NFU Scotland has also called for farmers to be compensated for the rising price of wheat. It says that the food chain should respond rapidly to the significant increase in feed costs faced by Scotland’s pig and poultry farmers.
The NFUS says that while increasing grain prices are good news for the country’s cereal industry, the sudden surge in prices has had an immediate impact on production costs for those keeping pigs and poultry - for whom grain makes up a high proportion of their rations.
It says that despite significant media coverage of high grain prices, buyers of pigs, poultry meat and eggs have resisted improving the prices they pay to farmers for their produce. This has slashed the margins that producers in these sectors are making at a time when many are faced with high re-investment costs on farm or servicing the cost of recent investment in their businesses.
Philip Sleigh, who represents the pig and poultry sectors on the NFUS board, said, "Those parts of the food chain that require Scottish pork, poultry meat and eggs need to wake up to the damage they are doing to the sectors by not reacting to the sudden surge in costs being faced by many Scottish farmers.
"The rise in feed costs has been so rapid that many producers have not been able to protect themselves by forward buying their feed requirements. They are therefore taking much higher production costs on the chin without a corresponding increase in what they are paid for their pigs, broilers and eggs. In fact some eggs buyers have actually been forcing prices down just when the opposite is needed.
"This refusal by buyers to accept or recognise the need for producers to make an acceptable margin could be the last straw for a number of Scottish pig and poultry producers who are having to take decisions now on whether to invest in their businesses or close down," he said.
"In some cases the investment is needed to meet regulative requirements such as Nitrate Vulnerable Zone (NVZ) rules on slurry storage. For egg producers, investment is also needed for new buildings and equipment in order to comply with the impending ban on conventional laying cages. Without the prospect of a fair return on that level of investment, it will not be made and more Scottish producers could walk away from the sectors," he said.
"Other producers who have made investment in new buildings are now having to service the debt taken on for those works - so they are in the same position of being unable to afford to sell their products for prices that are at, or below, the cost of production.
"Over recent years, the Scottish pig industry has shrunk significantly due, in part, to some retailers continuing to stock their shelves with imported pig meat that does not meet UK welfare standards. We need them to back our farmers but if they, and their buyers, also refuse to accept the reality of the increased production costs producers currently face then we could well see a further fall out of Scottish pig production.
"The same situation applies to our poultry units. The legislation banning conventional cages was always going to be a pivotal moment for Scottish egg production but if the market place fails to react to current production costs then we could also see even more closures of Scottish egg production units than expected.
"Buyers must be in no doubt about the significance that their pricing policies for pigs, poultry meat and eggs will have in the coming weeks and months. They have the opportunity to send out a positive signal that our products are wanted and value them accordingly."
He said that continued failure to recognise current rising production costs would have very serious implications for the future supply chain.
