Feed price pressure takes its toll

Egg and poultrymeat producers are bracing themselves for another round of feed cost increases, putting renewed pressure on the bottom line.

A combination of severe drought in the USA and delayed crops in western Europe pushed maize and soya to record highs in July, with soya meal up more than 50% since the start of the year.

Feed wheat prices also jumped £40/t in little over a month, prompting industry organisations to write to retailers and discounters demanding sympathetic treatment.

“New crop positions are at historical highs,” said the letter, signed by NFU poultry board chairman Duncan Priestner, BPC chairman John Reed and BEIC chairman Andrew Jorêt. “Tight supplies of feed grains will force high production costs for the next 12 months.”

The letter also points to rising fuel and labour costs, and the £65/t premium for non-GM soya in poultry rations, as still required by most supermarkets.

“The poultry industry has made great efforts to invest in new capital infrastructure,” the letter adds. “We ask that you reflect the fundamental change in commodity prices in your pricing considerations and promotional schedules for the year ahead.”

“It’s crushing our margins.”
James Charlesworth

But the British Retail Consortium, representing the supermarkets, appears less than sympathetic. “Yet again the farming lobby groups are targeting retailers and overlooking the fact that supermarkets are not the sole outlet for all British produce,” said BRC director general Stephen Robertson.

“It doesn’t take a letter from the NFU for major retailers to have an eye on commodity prices and what steps are needed to support the producers within their supply chains,” he added.

In the broiler sector, much of the pain is expected to be felt by the processors, with growers protected to some extent by the feed price ratchets in their contracts.

But independents are already feeling the full force of higher feed prices. James Charlesworth, who grows 330,000 broilers in Cheshire, said he was experiencing “painful times”. His ration had increased £35/t to about £330/t in recent weeks, but he was still receiving the same 87p/kg for the birds.

“It’s crushing our margins,” he said. He estimated he would need another 7p/kg and, if it were not forthcoming or feed prices went higher still, he would leave sheds empty.

David Kynaston, who supplies Gafoor from his broiler unit in Powys, said many growers had been taken by surprise. “Very low amounts of forward cover have been taken.” With the integrators actively recruiting, he believed more independent growers would be tempted to join them.

Egg producers are also taking a hit. Having seen production edge back into profit in April, following egg price rises in March, free-range producers are back in the red, losing over £1 a bird, according to BFREPA costings for July.