Free-range egg producers need to see a significant and immediate increase in the price they receive to maintain supplies in the long-term.
Producers have struggled for 18 months amid a background of rising costs, low egg prices and oversupply in the free-range market, says the NFU. However, since 1 January and the introduction of the Welfare of Laying Hens Directive, egg supplies have tightened across the UK and Europe, leading to increases in the price of cage and barn eggs, but as yet no meaningful move in the free-range market.
NFU poultry board chairman Charles Bourns has called on the supply chain to recognise the “seismic shift” that is taking place and to ensure that the British free-range egg industry retains its ability to invest in the future.
“Egg producers have responded to both legal requirements and market demand over the years by converting to new enriched cages and free-range production,” he said.
“Many have borrowed serious amounts of money to invest in new buildings in the run up to the conventional cage ban. Producers have been struggling to meet capital repayments and run profitable businesses. We know the market has been affected by oversupply until recently, but there are very clear signs it is now on the turn.”
Leading packer Noble Foods has been able to pass on a small price rise of 3p/doz for prices of free-range seconds and small eggs, reflecting the improved market for processing.
“While this price change will not be deemed significant, there is imminent cause for greater optimism, as the surpluses that made 2011 so difficult appear to have worked their way through the system,” said farms director Tom Willings in a letter to free-range producers.
The rapid rise in wholesale prices this year reflected the shortage of cage eggs, though free-range eggs “remain available”.
Mr Willings maintained that retail and wholesale values were not closely linked. “However, activity in the lower tier is indicative of the general conditions within the market as a whole, and we are deep in the process of extensive customer price negotiations,” he said. “We expect that we will be able to deliver a more substantive base price increase in March.”
Mr Bourns said retailers in particular needed to think about the long-term security and future supply of British free-range eggs and “avoid the risk of irreparable damage being done to the supply base by not getting the market signals right now”.