Poultry industry may be hit by more feed price hikes

Further increases in feed costs this winter are a distinct possibility and price rises for both eggs and poultrymeat are essential to keep producers in business.

Addressing a recent NFU open meeting in Oxfordshire, South East Poultry Board chairman Martin Humphrey explained that wheat prices had been driven higher by shortages in Russia and the Black Sea region.

But commodity speculators and pension funds were also to blame, as they sought to profit from market volatility. “They don’t care what the price is, they just trade the movements. As a result, wheat is almost £30/t higher than it should be.”

Despite this, there was a danger that prices could go higher still. Figures from the HGCA showed that the UK had a wheat export surplus of just 1.3m tonnes, compared with 2.5m tonnes last year and 3.6m tonnes in 2008/09.

“The Ensus and Vivergo biofuels plants will increase the usage of wheat this season by another 700,000t. And trade estimates suggest that at least 1m tonnes will be exported by the end of the year, leaving only 300,000t to export. There is a real chance that the UK could be importing feed wheat before next harvest.

“We are currently at a £25/t discount to French wheat, and with another £15/t haulage on top, we could be looking at a significant cost increase,” said Mr Humphrey. “That’s the nightmare scenario in terms of feed prices.”

Poultry producers had already endured a £40/t increase in their feed costs, so it was essential that the top end of the supply chain started paying better prices, he added.

James Hook of poultry business P D Hook told the meeting that his company’s feed bill had already increased by £500,000 a week, money that could not just be absorbed. “If retailers don’t pay up, the industry will pack up,” he warned.

Mr Hook said he was optimistic that retailers would pay more – “it’s not a debateable situation” – but feared they would also demand longer terms of credit.

But egg producer Tim Findlay form Wokingham, Berkshire, said the egg market continued to suffer from over supply and, while some packers had increased prices, it was not enough to cover the feed cost rise.

NFU poultry board chairman Charles Bourns told the meeting that egg and poultrymeat prices had risen last time there was a grain price spike in 2007. But retail prices had not dropped back since then, so pushing for more money from the supermarkets now could be a struggle.