When Daniel Brown took up free-range egg farming in 2004, it was seen as “virtually a bit hippie-ish. Nobody actually considered the place eggs come from.”
For his household enterprise in Suffolk within the east of England, nevertheless, the transfer was a shrewd one. Brown joined an moral farming success story during which free-range flocks grew to account for greater than two-thirds of eggs offered in shops.
However now cracks are rising in Brown’s enterprise mannequin — and that of the entire sector. Shortages have pressured supermarkets to ration eggs after costs paid to farmers didn’t preserve tempo with manufacturing prices, prompting some producers to stop the trade or reduce their flocks.
The disaster has hit free-range farms particularly onerous as a result of they are usually small, financially susceptible companies.
As inflation continues to climb and meals trade logistics face intense pressure, pictures of retailer cabinets empty of eggs have grow to be some of the high-profile examples of a provide chain gone awry.
For Brown, the crunch has led to a six-figure overdraft, and whereas he has regained some floor from his arable crops and packing enterprise, he continues to function at a loss.
Free vary has “gone from a distinct segment product to the commodity everybody needs — however as soon as issues are commodities, retailers screw the worth”, he mentioned.
Supermarkets Aldi, Lidl, Asda, Morrison, Marks and Spencer, and Tesco have in current weeks imposed caps on the variety of containers of eggs that clients should buy, whereas rival J Sainsbury this month sparked fury amongst farmers by briefly importing Italian eggs.
With some egg farmers quitting the trade, the whole UK flock of laying hens, which peaked at 44mn final yr, has shrunk to about 38mn, in line with the British Free Vary Egg Producers Affiliation.
Lower than half of the drop is right down to the two.9mn birds misplaced to avian flu in an outbreak that started in 2021, however the specter of influenza, and the price of insuring in opposition to it, is one other deterrent to farmers.
Retail costs for eggs rose 23.1 per cent year-on-year in October, in line with authorities data, however prices have escalated much more sharply. Brown mentioned rooster feed — which accounts for almost all of the price of an egg, and depends on world grain markets — had fluctuated between £180 and £230 a tonne earlier than hovering to £420 following Russia’s war on Ukraine. It has now pulled again to about £390.
Patrick Lynn, a free-range egg farmer from Nottinghamshire, mentioned he confronted an additional £40,000 invoice for pullets, or younger hens, for his subsequent flock after value pressures added £1 to the worth of every one.
He now receives £118.8p from packers for a dozen eggs — an increase of greater than 30 per cent since March, however not sufficient to cowl prices.
“We now have tightened our belts so far as we probably can. Plenty of farmers have been working for nothing or paying themselves effectively beneath the minimal wage over the previous yr simply to maintain going,” mentioned Lynn. Among the many hardest hit had been current entrants to the trade who had taken out loans to construct rooster housing, he added.
Some producers have realised they’ll earn extra by changing sheds to storage amenities or industrial items.
Whereas small farms producing free-range eggs are susceptible, eggs from caged birds are produced at scale by giant corporations that combine farming with egg packing and are higher outfitted for monetary shocks, mentioned Robert Gooch, BFREPA chief govt.
Farmers provide eggs through packers together with Noble Meals and LJ Fairburn, however they blame the squeeze on retailers.
Lynn mentioned his eggs had been offered to Tesco for a worth that tracked the worth of feed, making him higher off than some rivals — however he’s nonetheless going through losses due to rises in different prices resembling vitality and labour.
Gooch estimated that about 30 per cent of farmers had a feed tracker contract and famous that Tesco had “led the way in which”. However he mentioned all contracts ought to function on a “value plus” foundation, like these utilized in dairy farming, to consider a broad mixture of prices.
Andrew Opie, director of meals and sustainability on the British Retail Consortium, a commerce physique, mentioned supermarkets “know they should pay a sustainable worth to egg farmers however are constrained by how a lot further value they’ll move on to customers throughout a value of residing disaster”.
However privately some retailers admit that aggressive pricing by discounters on fundamental items resembling eggs has saved retail costs comparatively low throughout the board.
Clive Black, analyst at brokerage Shore Capital, mentioned: “Many egg producers are underneath strain and a few at the moment are giving up the ghost underneath the monetary pressure, which is compounding an already tight provide chain.”
He added that the crunch had been “pushed by supermarkets, main meals service chains and certainly meals producers that use egg as an ingredient”.
The Nationwide Farmers’ Union has urged ministers to research the egg provide chain and intervene to assist producers.
The Division for Surroundings, Meals & Rural Affairs mentioned it understood “the difficulties that rising prices for feed and vitality during the last yr, mixed with the chicken flu outbreak, are inflicting for farmers and we’re working with trade to watch the egg market”.
The strain has referred to as into query a goal by main retailers to finish the sale of eggs from caged hens by 2025. Manufacturing prices for free-range eggs are about 50 per cent greater than for these from caged birds, mentioned Andrew Joret, chair of the British Egg Business Council, a commerce group.
However with Christmas a key season for egg gross sales, farmers mentioned they anticipated shortages to proceed till costs rose additional and doubtless stretch into subsequent spring, given the time lag for elevating new laying hens.
“That is the tip of the iceberg of the strain within the provide chain,” mentioned David Exwood, NFU vice-president, including that fruit and vegetable growers and pig farmers confronted equally precarious conditions.
“We’re attempting to focus on these points, to get folks engaged . . . earlier than we get to empty cabinets. Leaving it too late just isn’t the reply.”
