July 27, 2012
UK poultry farmers request eggs, chicken price increase
UK poultry farmers wrote to leading supermarkets this week , demanding an increase in the prices of eggs and chickens by as much as 20% due to a steep rise in the feed costs, as reported Wednesday (July 25).
The letter, which has been seen by just-food, was sent by the National Farmers' Union, the British Poultry Council and the British Egg Industry Council to the UK's largest supermarket groups.
Drought in the US has meant corn and soy harvests are going to be significantly lower than originally forecast. Meanwhile, Russia recently cut its forecast wheat harvest due to poor weather conditions. This has prompted a jump in global feed prices and placed the margins of protein groups under increasing pressure.
A spokesperson for the NFU told just-food that, far from demanding price increases, the groups hoped to increase co-operation and transparency down the supply chain in order to ensure the sustainability of the industry.
"We aren't asking them to necessarily increase prices by a certain amount. We are literally pointing out that feed prices, due to weather conditions in America, have gone out of control," the spokesperson said.
"All parts of the supply chain - the farmers, the packers and processors and the retailers - need to work more closely together so we can ensure that product cost inflation does not result in lasting damage. It is in all our interests to maintain long-term sustainability chains. At the end of the day, it is what we all want."
The cost of UK feed wheat has risen by 20% in the last month alone, while prices of the other main poultry feed ingredient, soymeal, have leapt by 65% in the last six months because of a record-setting drought in the US Midwest. The price of corn, the other main poultry and livestock food crop, is also rising, in part because of the large amounts of the crop going into often subsidised biofuel production, and partly because of a drought in southern Europe. The chief executive of the British Poultry Council, Peter Bradnock, told the Financial Times that the cost of producing a chicken had risen by around one-quarter since the beginning of the year, and that farmers needed to pass those price rises on.
The move follows a dispute between dairy farmers and milk processors that saw farmers blockade processing plants in protest at cuts in the amount they receive from large processors. The cuts were in response to a sharp fall in cream prices on the commodities market.
World market conditions, combined with the stranglehold that major supermarkets have on food prices, have left UK farmers trapped in between. The on-going drought in the US is likely to push feed prices for livestock up further, which will eventually translate into higher food prices in the UK, notwithstanding supermarket attempts to limit the costs to consumers.
Retailers are resisting pressure to pay more to farmers in the hope that commodity price rises will be temporary. However, with many farmers struggling, the industry may depend upon the willingness of supermarkets to pay more. Although wheat prices have yet to hit the levels they did in 2008, when many countries saw food riots, food price inflation is likely to hit the poorest disproportionately, including in the UK, damaging household budgets and consumer confidence.