U.K. egg industry in crisis as input costs soar

If supermarkets do not pay more for eggs, ever more U.K. producers will stop production as losses mount.

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There are fears that, unless the price paid for eggs increases, numerous egg producers in the U.K. could go out of business. Courtesy: BFREPA
There are fears that, unless the price paid for eggs increases, numerous egg producers in the U.K. could go out of business. Courtesy: BFREPA

The U.K. egg industry is in a perilous position, with numerous producers facing bankruptcy unless higher prices are paid for eggs.

Industry body the British Egg Industry Council (BEIC) is warning that egg farmers are facing unprecedented rises in production costs, with hundreds of farms in real danger of going out of business if returns do not significantly improve.

In late March, it revealed that farmers were losing money on every egg they produced, with the situation deteriorating following the invasion of Ukraine. Many farmers had already stopped producing and the falling number of hens would put pressure on egg supplies, it warned. The national flock has already declined by about 4 million birds over the preceding year, the association added.

The war in Ukraine has added 25-30p (US$0.33-0.39) per dozen eggs to feed costs, which were already at the forefront of the sector’s input inflation. This increase follows what has been described by the association as “never-before-seen-cost-increases” right across the supply chain from pullets to energy and made worse by labor shortages.

On the brink

The concerns expressed by the BREIC are echoed by member organization the British Free Range Egg Producers Association (BFREPA). It warns that some of its members can only last another six months, while others are said to be already on the brink.

Robert Gooch, BFREPA Chief Executive Officer, said: “The free-range egg sector is in crisis and if something doesn’t change these farms will close, and the people who run them will not have an income.

“This is a situation completely out of farmers’ hands. The whole world can see that feed and energy prices have gone through the roof."

According to the BEIC, the increase in uncontrollable input costs needed to produce eggs, which is currently up by around 30% on farms, shows no signs of slowing, and the availability of British eggs on supermarket shelves will be seriously under threat if these costs are not passed on.

Retailers must act

Producers are calling on supermarkets to increase the price of a dozen eggs on their shelves by 40p, adding that it is vital that the additional money makes its way down the supply chain to the farmers who need to save their businesses.

BREPA has been raising the situation with all the country’s major retailers, but without success. It has called for a crisis summit, inviting every major retailer and packer to attend to outline what they will do to help support farmers.

With consumer price inflation, at 7%, running at its highest level since the 1990s, retailers are keen to protect their own margins and keep their customers happy. In April, the U.K.’s largest supermarket chain announced that it was laser focused on keeping the cost of weekly shopping in check, working in close partnership with its suppliers. At the same time, it announced a doubling in profits for 2021.

Egg producer costs in detail

The cost of layer feed in the U.K. had reached GBP400 per metric ton by the end of March, an increase of around 50% over two years. Prices are expected to rise further given that Russia and Ukraine are major exporters of key raw feed materials.

The cost of pullets has risen by 15% over the same period, while transport costs were up by 30%. The wholesale cost of gas from suppliers has increased by 250% since the start of 2021, and electricity costs are also increasing. Egg packs are reported to have risen by 15% since November 2020.

The egg industry, like others in the U.K., is experiencing labor shortages in a wide range of industry roles, from farms to processing plants. This has led to significant wage inflation, which will further increase the country’s minimum wage.

 Poultry Feed DeliveryAmongst the most significant input cost increases have been those for feed and transport. Courtesy BFREPA

 U.K. not self-sufficient in eggs

The U.K. is estimated to have produced 11.3 billion eggs in 2021 and consumed 13.5 billion, making it less than self-sufficient. At retail level, egg sales were worth GBP1.2 billion, a decrease of 4% on the year before, figures from the BEIC reveal.

While increases in the price paid for eggs recorded last year may not be enough to cover rising costs, the U.K.’s Department for Environment, Food and Rural Affairs notes that farm-gate egg prices in the fourth quarter of 2021, the latest quarter for which data is available, were 7.4% higher when compared to the fourth quarter of 2020.

Seventy-five percent of eggs sold at retail level are free range, while free-range eggs account for 64% of the country’s egg production.   

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www.WATTAgNet.com/blogs/23-poultry-around-the-world/post/44480

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