October 8, 2020
UK's expanding free range egg industry carries risks
The rapid expansion of free range egg sector in the United Kingdom posed risks of oversupply in the market that can drive profits down and reduced income.
After the publication of an independent report into the impact of retailer cage-free 2025 commitments, the British Free Range Egg Producers Association (BFREPA) made a statement that if the free range egg industry continues to expand at its current rate, it will create a significant oversupply situation, drive down the price paid to farmers and reduce profitability.
Free range production has increased by 14% since 2017 to nearly 25 million hens.
ADAS, a UK-based independent agricultural and environmental consultancy, forecasted that over the next five years, only 2% production increase is needed to meet the predicted growth in free range egg demand of just 300,000 cases.
BFREPA chief executive officer Robert Gooch said: "There is an incorrect assumption from many in the sector that retailers moving away from colony eggs will lead to a surge in demand for free range. That is simply not the case, and this report confirms that. "
"We have been warning for many years that rapid expansion will create a situation of oversupply, all the while, the price paid to farmers has diminished and is now 20% lower than it was five years ago."
"The trend is clear, as production increased - the price paid to farmers has decreased. This situation is unnecessary and unsustainable."
Aside from the expansion of existing producers, BFREPA saw new producers entering the sector, often encouraged by new contract bonus which disappears over time.
To help secure long term sustainable prices, a model contract was made available to all free range egg producers last year.
BFREPA launched a new online Costings Portal to help producers understand the market better. The Costings Portal allows farmers to enter flock data and egg prices and compare their situation with other farmers across the UK and Northern Ireland.
Current data shows that most free range egg producers are not breaking even.
"Our data from ADAS shows a break-even price of £1.01 (US$1.30) per dozen, but our members are submitting prices through our portal which show that they are being paid significantly less than that – about 88p (US$1.14) per dozen on average," Gooch said.
"There is a huge range of producer prices in the market, ranging from below the cost of production to good prices to tempt new entrants into the sector.
"Given this variability, this portal provides the sector with some transparency about what is happening in the supply chain, particularly for retailers who will be able to see if the cost of production price increases given to packers are being passed down to contracted producers."
- The Poultry Site