So you want to… produce free-range eggs?

THE FREE-RANGE egg market may be growing at a heady rate, but set-up costs and the dedication required can put off otherwise interested farmers. John Widdowson, vice-chairman of the British Free Range Egg Producers Association, says the best way to learn about the sector is to talk to packers, feed suppliers and other farmers before launching any new enterprise.

Markets

Free-range egg sales reached 189m in the year ending Feb 27, 2005 – a rise of 15.4% year-on-year – and cornered 37% of the big retailers” egg sales. There are over 1000 free-range egg producers in the UK, and about 80% of their eggs are sold through the supermarkets, says Mr Widdowson. Most are supplied via the main egg packing companies.

Packers determine farmers” egg prices according to supply and demand. But they are generally low-risk outlets and provide a guaranteed weekly income.

“The most fundamental piece of advice – before you even think about how big the shed has got to be or what sort of equipment to buy – is to find a market for the eggs,” says Mr Widdowson. Most packers are booked up, but supply and demand can change quickly, so new entrants should not be disheartened by a few initial rejections.

Another option is to work with companies offering franchise-type operations (see Could a franchise cut out the headaches?), where the producer is supplied with a total package including the building, birds and feed and a guaranteed buy-back on all eggs produced.

Some farmers choose to market their eggs direct to retail outlets or through farm shops and markets. Prices here are higher, but it is a difficult market to break into, says Mr Widdowson.

Free-range eggs face little competition from imports due to the success of the Lion standard, to which all big retailers have signed up.

Rules and regulations

Static chicken houses require planning permission, and farmers may well encounter resistance from local residents, says Mr Widdowson. “You might have an easier ride if you choose a field away from local houses. Mobile sheds may escape the attention of the local authorities, but this is something of a grey area and there is no guarantee they will escape planning permission.”

Although flock sizes vary, most commercial producers have 8000-12,000 hens, with a maximum limit of 16,000 in one house. Mobile sheds house up to about 3000 birds.

Some farmers have converted existing buildings, but few are suited to the job, and conversion, including ventilation and insulation, can cost almost as much as buying new.

The egg industry is highly regulated, and producers must register with DEFRA”s Egg Marketing Inspectorate. To comply with the Lion assurance scheme and the RSPCA”s Freedom Food scheme, farmers must not stock hens at more than 9/sq m indoors or 1000/ha outdoors.

One-third of the shed must be down to litter, usually chopped straw or shavings, and it is important to fence the outside area against foxes and other vermin.

Set-up costs

Static buildings cost about 18-20 a bird to buy and fit out with equipment like automatic feeders, drinkers, nest boxes, belt egg collection and slatted floors. “Some people think that you can just put an old shed in the middle of a field and fill it with hens. But that just isn”t the case,” says Mr Widdowson. “It”s a very automated environment.”

Mobile houses can cost considerably more, about 30 a bird, because of reduced economies of scale. “This type of house is best suited to supplying eggs into a niche market, such as organic, where a premium is paid over standard free range.”

Working capital

Most farmers buy in pullets at 16 weeks old, when they are ready to start laying. These cost about 2.60 each and an 8000-bird flock will consume almost 1000 of feed every week. “The birds will be aged 35-40 weeks before the flock is showing a positive cash flow,” says Mr Widdowson. A provisional order for a flock of pullets must be placed well in advance of the planned start date. Realistically, the pullet rearer needs 6 to 12 months” notice.

Labour

A 10,000-bird flock will require one full-time worker, seven days a week, although labour requirements are higher on mobile units. “Management input does have to be very high to get good results,” says Mr Widdowson.

“A lot of things can go wrong and nobody should underestimate the commitment required; it”s not an easy option.” But anyone with good stock skills should adapt to poultry care relatively easily, he adds.

Hens are kept for about 56 weeks, after which production levels become uneconomic. They are then slaughtered and the shed and dismantled equipment are cleaned and disinfected, taking two to three weeks.

Health risks

One of the main concerns for anyone keeping hens is feather pecking. Beak trimming is due to be banned in 2010, with few viable alternatives yet to be found.

Diseases and pests can spread quickly so it is important to check the hens carefully each day to enable early treatment. Sick and broody hens should be kept separate from the main flock. But all chicks are fully vaccinated before being sold, and with good management most flocks will remain healthy.

Niche markets

Organic eggs make up just 6% of supermarket sales, and volumes are growing at about 6% year. “There is a lot of uncertainty over the organic market at the moment because of a tightening of the rules which will add considerably to costs,” says Mr Widdowson. “As yet there is no guarantee that these extra costs will be recovered from the market.”

But smaller niches like exotic breeds and coloured eggs are growing rapidly, and new entrants may find greater interest from buyers here.

Advantages over other forms of diversification

The key benefit to diversifying into free-range eggs is that producers continue to farm, with the associated tax advantages. “You are also getting into a market which has assured growth; it is forecast to take 40-50% of the market by 2012,” says Mr Widdowson.

Paperwork

Paperwork levels are the same as in other sectors of farming. Producers will need to join farm assurance schemes, and must have product liability insurance. Although no set-up grants are available, farmers are now entitled to receive the single farm payment.

Profitability

Most farmers can expect to make a margin over feed and pullet costs of about 6 a bird. “But this figure should not be viewed as profit,” says Mr Widdowson. “There are a lot of other costs to be deducted, such as labour and capital depreciation. It is fair to say that this is not a get-rich-quick scheme.”

More information

More information can be obtained from the British Free Range Egg Producers Association. Log on to www.bfrepa.co.uk, or call Mr Widdowson on 07889 765824.