james davy
LONDON, Dec. 19 (Reuters) – In Britain, the damage done by rampant inflation can be seen in the fate of this humble egg.
As the war in Ukraine drives up energy and chicken feed costs, farmers say they are no longer being paid enough, upending the economics of a major staple.
Many supermarkets in the country, including market leader Tesco TSCO.L And third-placed Asda have both imposed sales rationing, blaming bird flu ravaging Europe and the US, which they say has contributed to shortages in the UK.
But British farmers argue that while the outbreak is a factor, there aren’t enough eggs because they lose money on every carton sold, forcing many to cut production and some to quit entirely.
Robert Gooch, chief executive of the British Free Range Egg Producers Association (BFREPA), told Reuters: “The stupidity of the whole thing is that we warned the retailers, we’ve given them a lot of notice that this was going to happen. .”
The association estimates that the total UK laying flock has fallen by 6% to 36.4 million head in the past 12 months, pointing to tighter supply ahead.
Frank Thompstone said he cut the number of free-range hens on his Burton-on-Trent farm in central England from 36,000 to 24,000 last year to limit his losses. By October, he had had enough, giving the required 12-month notice in his contract with the buyer.
Buyers responded by packing the eggs and selling them to supermarkets for 15p a dozen, which Thompstone said was still costing him money.
“Why should we commit?” he told Reuters. “Frankly, I’m surprised. It’s the retailers who own the money.”
Driven by consumer demand, UK egg producers have for many years focused on free-range eggs, which now account for 70% of the market. But only 13% of eggs are free-range in the EU, and there are limited options to fill empty UK supermarket shelves with imports.
The National Farmers’ Union (NFU) said egg shortages could be just the beginning, as new-age energy and grains are expensive and, combined with labor shortages, shelves will be left on the shelves unless food producers and retailers agree fairer terms for the future. It’s empty.
While double-digit inflation has strained relations between global producers and retailers, fierce competition among British food retailers has kept prices below the European average and they have some of the lowest profit margins.
That, combined with a cost-of-living crisis sparked by soaring food and energy costs, has limited their room for maneuver, retailers say.
However, egg producers say that while supermarkets have raised retail prices and paid farmers more, the increase has not been enough to cover the surge in costs.
While egg prices for UK producers are 35% higher than in 2019, the cost of chicken feed raw materials has soared 90%, the NFU said.
The retail price of eggs has risen by 27% in the past year alone, official UK figures show.
‘told you so’
According to BFREPA, it costs farmers about 138p to produce a dozen eggs. But buyers will only pay around 109p, while retailers are selling them for between 219p and 410p.
Rising costs and bird flu have hurt farmers across Europe, with global egg production expected to fall this year for the first time ever, according to French group CNPO, the EU’s largest producer.
Some 750,000 UK birds have been culled due to bird flu and there is no guarantee they will be replaced, but many more could fall victim to economic pressure.
Daniel Brown raises 44,000 hens on his farm in Bury St Edmunds in eastern England, laying 40,000 eggs a day.
“We explain clearly to retailers why prices need to go up, what the cost increase is, what the consequences are, and they just ignore you,” he told Reuters. “And then it worked.
“It’s basically ‘I told you so,’ but it doesn’t give you any satisfaction.”
Last month, Tesco, Aldi and Waitrose said they had given an extra £29 million ($35 million) in support to the egg industry.
The British Retail Consortium, which represents supermarkets, said it recognized the need to pay farmers sustainable prices, but said they also faced higher costs.
Brown said he would have until April 2023 to decide whether it was worth restocking the birds for the next production cycle, but warned that industry capacity would not ramp up anytime soon.
He said: “If a retailer made a fantastic offer to the industry today and said ‘another 70p a dozen’, it would still take six to eight months to raise enough chickens to replace those lost. “
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(Reporting by James Davey, Editing by Kate Holton and Tomasz Janowski)
((James. Davey@ThomsonReuters.com))
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