December 23, 2024 | 20:35 GMT +7

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Tuesday- 14:17, 20/12/2022

Britain’s broken egg industry shows the price of food inflation

(VAN) In Britain, the damage done by rampant inflation can be seen in the fate of the humble egg.

As the war in Ukraine drives up the cost of energy and chicken feed, farmers say what they’re getting is no longer enough, upending the economy of an important staple food.

Many of the country’s supermarkets, including market leader Tesco (TSCO.L) and No. 3 Asda, have rationed sales, blaming avian flu that has ravaged flocks in Europe and the United States and, they say, has led to a British deficit.

But British farmers argue that while the outbreak is a factor, there aren’t enough eggs because they lose money on every box sold, forcing many to cut production and some to stop altogether.

“The stupidity of the whole thing is that we warned retailers, we gave them adequate notice that this was going to happen,” Robert Gooch, CEO of the British Free Range Egg Producers Association (BFREPA) told Reuters.

The association estimates that the total laying population in the UK has fallen by 6% over the past 12 months to 36.4 million, suggesting that supply is getting even tighter.

Frank Thompstone says he reduced the number of free-range chickens on his farm in Burton-on-Trent, central England, from 36,000 to 24,000 last year to limit his losses. In October he had had enough and gave the required 12 months notice to his contract with his buyer.

The buyer, who packs the eggs and sells them to supermarkets, offered an extra 15 pence per dozen in response, which Thompstone says is still making him a loss.

“Why should we commit to that?” he told Reuters. “I’m frankly appalled. It’s the retailers who are in control.”

Driven by consumer demand, British egg producers have for years focused on free-range, which now represents 70% of the market. But with only 13% of the European Union’s free-range eggs, the ability to fill the gaps in UK supermarket shelves with imported eggs is limited.

The UK’s National Farmers Union (NFU) says the egg shortage could be just the beginning as the new era of expensive energy and grains combined with labor shortages could lead to more empty shelves unless food manufacturers and retailers agree about fairer conditions for the future.

While double-digit inflation has strained the relationship between producers and retailers around the world, fierce competition among UK food retailers has kept prices below the European average and their profit margins among the lowest around.

That, coupled with a cost-of-living crisis fueled by rising food and energy costs, limits their room for maneuver, retailers say.

Still, egg producers say that while supermarkets have raised retail prices and paid farmers more, that increase is not enough to cover the exploding costs.

The NFU says that while UK producers are being paid 35% more for their eggs than in 2019, the cost of chicken feed raw materials has risen by 90%.

Official UK data shows that selling prices for eggs have increased by 27% in the past year alone.

‘I TOLD YOU SO’

According to BFREPA, it costs a farmer about 138 pence to produce a dozen eggs. But buyers only pay about 109 pence, while retailers sell them for between 219 and 410 pence.

Higher costs and bird flu have hurt farmers across Europe, and global egg production is expected to fall for the first time this year, according to the EU’s largest producer, French group CNPO.

Around 750,000 birds in the UK have been culled because of avian flu and there is no guarantee they will be replaced, but more could fall victim to financial pressure.

Daniel Brown, whose 44,000 chickens lay 40,000 eggs a day on his farm in Bury St Edmunds in eastern England, says a recent price increase of 18 pence per dozen offered some relief, but he still wasn’t breaking even.

“We have clearly explained to the retailers why the price has to go up, what the cost increases are, what the consequences will be and they are just ignoring you,” he told Reuters. “And then it happens.

“It’s basically ‘I told you so’, but it doesn’t satisfy you.”

Last month, Tesco, Aldi and Waitrose together said they had provided a further £29 million ($35 million) in aid to the egg industry.

The British Retail Consortium, which represents the supermarkets, says it recognizes the need to pay farmers a sustainable price, but also says it faces higher costs.

Brown said he will decide by April 2023 whether it is worth reintroducing birds for another production cycle, but warned the industry’s capacity won’t improve any time soon.

“If the retailers came to the industry today with a brilliant offer and said ‘take another 70 pence in a dozen’ it would still take six to eight months to raise enough birds to replace the lost birds, ” he said.

Tr.D

(Reuters)

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