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November 14, 2008

                     
UK poultry producers hit by retail price war
                     


Retail chains in the UK are initiating vicious price wars to win over consumers at the expense of the poultry producers.

 

As the economy slowdown and credit crunch sink in, consumers are increasingly switching to cheaper meats. To win consumers over, large retailers are cutting prices aggressively, with Tesco said to have slashed 17 percent in chicken prices.

 

Wheat prices have declined due to buoyant harvests in several countries, but even that has left a bitter taste in the producers' mouths.

 

When production costs were high, retailers were slow to increase prices but they wanted to cut prices immediately after the easing of input costs, said Charles Bourns, chairman of the NFU Poultry Board.

 

Bourns said many producers had been encouraged to buy their feed forward when feed costs were sky high, therefore they were now locked into high-priced contracts and were unable to reap the benefits of reduced input costs.

 

A free-range egg producer in East Devon said while supermarket prices remained high at GBP 1.52 for half dozen of eggs, producers receive the unprofitable price of GBP 0.42.

 

With massive investment required by producers in the coming years, some had decided to cut losses by stopping production, said Bourns.

 

The retailers' price wars should be done with their own margin, not the producer's margin, Bourns added.

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