The government is in the process of introducing regulations to boost confidence in the egg sector, as Defra’s John Powell told the British Pig & Poultry Fair
The government plans to share draft regulatory proposals with the egg industry over the summer as it looks to create a fairer playing field for Britain’s egg producers.
At the British Pig & Poultry Fair John Powell, head of the agricultural sectors team at Defra, discussed the outcome of the government’s fairness review in the egg supply chain. The UK-wide consultation closed in December having received 40 direct responses and the views of over 200 egg producers represented through member bodies. Producers, packers, wholesalers, retailers and trade associations all responded, from across all parts of the UK.
There were a number of key findings from the consultation, Powell revealed. While many respondents demonstrated good relationships and mutually beneficial agreements with customers, Defra also found a number of areas of concern that has led it to introduce a new regulatory framework for contracts.
Around a quarter of respondents said contracts they’ve entered into in the last five years haven’t met their needs, and despite most respondents having written contracts, there are also a relatively high number of verbal agreements. “We know from this and previous supply chain fairness reviews that it’s in these cases where issues can occur if disagreements arise,” Powell said.
The vast majority of respondents agreed all contracts should be in writing and many said a set structure would be beneficial. There were calls for clauses including clear notification periods for termination, transparent pricing mechanisms, defined grading standards, payment terms and dispute resolution processes, and for unilateral changes to be prohibited.
Unsurprisingly, pricing is a primary area of concern for producers. “While we are not going to regulate for what prices should be – they should be left to a free-market dynamic and commercial negotiations – we are seeking to address areas of potential unfairness within contracts to ensure they work for both negotiating parties,” Powell explained.
The egg sector is not the first to receive government intervention to improve fairness – Defra has already laid regulations in the dairy sector, and draft regulations are currently under discussion with the pig industry.
Outlining what happens next, Powell said Defra will now work closely with the egg industry to ensure the outcome is one the sector believes is the most appropriate. Draft regulatory proposals will be shared with the industry in the near future, Powell said, and it is hoped that this process will commence in the summer. “We are committed to working with the sector and the regulations we introduce will ensure fairness and transparency across the supply chain to help the sector thrive in the future,” he concluded.
In a further line from his speech, Powell noted that at the Farm to Fork Summit in Downing Street in May, Defra announced it will be proceeding with legislation to remove the 16-week derogation period that exists around mandatory housing orders in AI outbreaks. “That’ll mean that those that produce free-range eggs will be able to continue to market their eggs as free range irrespective of the length of a mandatory housing order,” Powell explained. That legislation will hopefully be published before the summer, he added.
The cost of production
Also speaking in the session on “Costings, contracts and fairness in the egg supply chain” was Jason Gittins, technical director at Adas, who outlined how the consultancy calculates the cost of egg production.
Last year BFREPA arranged a series of roadshow meetings, which resulted in a review of the approach and reporting method. The latest costs and flock performance are set out in two detailed annotation documents – covering free-range and organic – that are updated every month and made available to members on the BFREPA website.
Separately, Adas calculates an average egg price paid by packers to producers each month.
Gittins revealed that the current typical cost of producing a dozen free-range eggs is £1.27, or £2.07 for organic. That takes into account a wide range of factors – with the biggest input costs being feed, pullets, labour and capital – but does not factor in a financial margin for the producer.