Noble Foods defends its price cut to free range egg producers

There has been growing anger in recent weeks over the savage cuts by egg packers in the prices paid to free-range egg producers.

Back in October, Noble Foods reduced its price by 10p/dozen and many other packers followed suit. The British Free Range Egg Producers Association subsequently warned that “this price cut leaves us in the red”.

To address these concerns, Noble Foods chief executive Peter Thornton agree to take part in a open debate at the British Free Range Egg Producers Annual Conference, held at Stoneleigh Park, Warwickshire.

Q I have listened to your analysis of the feed market and either I am not buying my feed right or you have possibly misread what is happening to a lot of producers?

“I didn’t make a decision on reducing egg prices based on the spot market. For me the right way to look at it was to look at the 70-80 producers buying feed from me. They are getting prices that more than cover the egg price drop which is how we arrived at the decision.

“As buying commitments unwind, we will try and hold the egg price as high as possible, to allow people’s businesses to benefit.”

Q Would you be able to give us some assurances that there won’t be another savage egg price cut in early 2009?

“I am not prepared to give any assurances. I cannot assure that our strategy is going to work and that we will be able to pass back value. There are many things that are unknown.

“I am confident that we can hold the market where it is and we have no current plans to do anything else on pricing.

“Noble Foods’ job is to hold prices as firm as possible to allow producers to see the benefits. My job is the keep the market high, but I don’t foresee January being a big problem.”

Q It looks as though the 7p a dozen that has been taken off the producers has gone into the retailers pockets to make their massive profits bigger?

“Free-range eggs is a profitable category for retailers, given the general economic trend towards value eggs. The retailer’s margin is most probably suffering significantly and people who are buying value eggs are diluting their margin.

“You may not be seeing a direct relationship between your producer price decrease and retailer selling price increases. This doesn’t mean that they are not investing in promotional activity. Maybe they are cross funding with some benefits that they are getting elsewhere through their business into the egg category.

“I can see why you are annoyed that this cut hasn’t gone through to consumers.”

Q Do you dispute the costing in the latest edition of The Ranger showing that the average free-range farm is making a 70p a bird loss?

“I read in The Ranger that one of the big players in free range is suggesting that there is quite a bit of money to be made out of free-range production. From our prices in October, our cost of production was lower than our producer egg price. But I have to also accept that some producers are feeling the pinch and losing money.

“My job is to try and find a way of improving this. I hope producers will eventually see the benefits of what we are trying to do.”


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