Egg packer Stonegate is to introduce a new feed tracker contract for its Waitrose suppliers, linking the price of eggs to the cost of feed.
The new contract, which covers both its British Blacktail and its Essential producers, will be launched next February and is designed to help farmers deal with feed market volatility.
In a letter to producers, Stonegate agriculture director Chris Ramsey explains that, in the last few years, volatility in the feed raw material market has impacted on producer returns.
“During the last 18 months, the situation has improved, with average feed prices falling. These falls have been experienced at a time of relatively stable egg prices, resulting in most producers benefiting from the situation.
“Currently, feed prices remain relatively low and it is more likely that prices will rise rather than fall. At the moment, if (feed) prices rise, this would happen in an environment that does not guarantee egg prices will follow or compensate.”
But the new model, developed in partnership with Waitrose, will ensure monthly changes in key feed raw material prices will be directly reflected in the producer egg price, ensuring more stable margins.
Stonegate was the first egg packer to introduce a feed tracker contract with the Clarence Court egg contract in 2012. That introduced a 1p/doz egg price change for every £5/t movement up or down in feed cost and Mr Ramsey said the payment would be similar under this latest initiative. “This feels right for us and our customers at this time,” he told Poultry World.
The initiative was welcomed by British Free Range Egg Producers Association (Bfrepa) chairman Myles Thomas, who said risk management in a volatile market was key to the success of the sector.
Noble Foods also introduced a similar mechanism for a limited number of its suppliers earlier this year.
Stonegate currently supplies Waitrose with all its own label eggs – both for the British Blacktail and the Essential brands. These eggs must come from farms with smaller flock sizes, and there is also a ban on offering hens for rehoming, under Waitrose’s traceability policy.
Stonegate has planned a series of regional meetings to explain the model more fully to producers.