October 28, 2010

 

UK poultry sector to be likely hit by more feed price hikes

Further rises in UK feed costs this winter are a distinct possibility that will raise more the prices of both eggs and poultry meat to keep producers in business.

 

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 GBP30 (US$47.39)/tonne higher than it should be," Humphrey said.

 

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 1.3 million tonnes, compared with 2.5 million tonnes last year and 3.6 million tonnes in 2008/09.

 

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

 

"We are currently at a GBP25 (US$39.49) a tonne discount to French wheat, and with another GBP15 (US$23.69)/tonne haulage on top, we could be looking at a significant cost increase. That's the nightmare scenario in terms of feed prices," said Humphrey.

 

Poultry producers had already endured a GBP40 (US$63.18)/tonne 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 said that his company's feed bill had already increased by GBP500,000 (US$789,765) 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 from 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 said that egg and poultry meat 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.