The British egg industry had a torrid 2022, but as the new year begins there are signs that things are improving. By Michael Barker
As 2023 dawns, Britain’s egg producers will hope to leave their own annus horribilis firmly in the past. A sector brought to its knees by debilitating input cost increases, insufficient returns and countless ongoing challenges has had to dig deep and do a huge amount of soul searching over what kind of future stands before it.
As supermarkets and packers finally step in to help shore up the industry, the question has to be asked: how did it come to this? And now the industry seems to be mobilising to tackle the exodus of farmers and reduced production, it’s the perfect opportunity to shape the future and consider what a sustainable egg supply chain should look like.
The latest UK egg production statistics make for disturbing reading. According to Defra figures, some 213 million dozens were packed during the third quarter of 2022, representing a hefty 9.6% drop on the same period a year earlier, and a 4.1% fall on Q2 2022. The direction of travel is both clear and alarming. There’s been much talk of the “perfect storm” hitting the British egg sector, but the reality is that the industry has been an increasingly precarious house of cards for some time, as additional pressures continue to be piled on. The British Egg Industry Council (BEIC) points out that with costs soaring, many egg producers have had no choice but to cease production rather than face the risk of losing money on every egg they produce. The ongoing transition away from enriched cages to meet retailers’ cage-free commitments by 2025 has also heaped pressure on farmers, while the loss of some hens due to avian flu has constricted supply, leading to the current shortage of eggs on shelves.
One of the big talking points has been the extent to which the burden has been shared throughout the supply chain, with the spotlight being thrown on both packers and retailers amid discussion of whether profits are being evenly distributed. Elwyn Griffiths, director at Griffiths Family Farms, also points the finger at the government and banks: the former for failing to support the industry or create an environment that encourages growth, and the latter for not trusting food production as a safe investment.
As the situation has become critical, supermarkets and packers are starting to react. At the retail end, in late November Tesco announced that it was fronting up an extra £14m of support for the egg sector, taking its investment to £27.5m from March 2022 to March 2023. At the same time Aldi pledged a further £12.5m, taking its total to £38m since April. Both retailers pledged to stock only British shell eggs in all their stores.
“The announcement of additional support for British egg producers by some retailers is a welcome step in the right direction,” says BEIC chief executive Mark Williams. “However, there is still progress to be made to ensure a long-term sustainable future for British egg farmers.”
Packers react
Griffiths – who refuses to blame retailers for the current crisis – says packers are aware of their own responsibility to ensure profitability reaches farmers, adding that the message has filtered through. “In the past packers have made more money at the expense of the producer, but one thing is for sure now is that a packer isn’t going to be able to operate if he hasn’t got the eggs and a farmer doesn’t have a successful supply,” he says. “The model seems to have broken down. Farmers are blaming the packers for profiteering but packers haven’t made any money either. We can’t sit here thinking that things will magically correct themselves – we need a wakeup call and packers and everyone else need to be talking to their customers. I don’t know if the government will give more support but we need to get the message through as an industry that it’s not packers versus producers. The industry needs to have a joined-up voice.”
Indeed, with pressure on all sides to respond, packers have been making moves to back farmers. In November Noble Foods announced its second price rise for egg producers in the space of eight weeks, with a 9p per dozen increase for all free-range producers kicking in from 1 December. Others have been developing even more creative solutions. Fairburn’s Eggs, for example, launched what it describes as an industry-first ‘bed and breakfast scheme’, which sees producers receiving a pre-agreed amount per bird for each flock, covering birds housed from 16-76 weeks, plus three weeks’ turnaround. There will also be a bonus paid for every flock, dependent on production. Crucially, Fairburn’s will provide every pullet, feed from its Lincolnshire mill and vet fees in return for the income from eggs and old hens. Producers, for their part, will be responsible for labour, water, repairs, building insurance, cleandowns, bird removal and pest control.
Chief executive Daniel Fairburn says that the initiative was formed because as farmers themselves, the company wanted to provide reassurance to producers and pledge to pay them a fair fee for looking after birds to high welfare standards, taking away as many risks as possible amid rising costs and insecurities. “We are confident it will provide a much-needed boost for the industry at a time when it needs it most,” he says. “The demand is there for eggs and the aim of this new initiative is to take the jeopardy out of the process.”
Fairburn explains that the amount calculated is designed to provide “an attractive, sustainable return for fellow producers” and that the model should give farmers the confidence to restock, avoiding the large initial outlays of cash on pullets and feed, and without exposure to increasing electricity, feed or pullet costs.
Learning from other sectors
During this year’s soul searching, the industry has looked at other agricultural sectors for inspiration, hoping to pick up ideas that could be applied in egg supply. When it came to designing the ‘bed and breakfast’ scheme, Fairburn notes that a similar model has worked well in the pig sector and he had sought to create a bespoke version for eggs. The dairy sector is also providing a beacon of hope, with British Free Range Egg Producers Association chief executive Robert Gooch namechecking Tesco’s successful Sustainable Dairy Group (TSDG) as an example of good practice. TSDG was formed in 2007 and still stands as the largest group of dairy farmers working directly with a retailer. Herds range from just 40 up to 1,900 cows, with the supermarket paying guaranteed prices under long-term contracts for their milk. Tesco notes that since 2007 it has paid a total of £300m over market prices to its dairy farmers, cash that has allowed for investment in animal health and welfare, carbon reduction and supporting nature on farm.
The centre of the scheme is an input cost price tracker devised by independent analysts at Promar International, which take into account the swinging feed, fuel and fertiliser prices to produce a sustainable return for farmers. Previously calculated every six months, it is now updated quarterly to more accurately reflect the huge volatility in the market. “Back in 2007 the dairy industry had reached a situation where farmers were finding it difficult to make a living supplying Tesco,” recalls John Giles, divisional director at Promar. “At that time farmers didn’t have a good feeling for what their costs of production were. When it first came in TSDG was quite controversial but now people look at it and think by and large it’s a good model. If you wanted to create a similar scheme in poultry, there’s no reason in principle why it wouldn’t work.”
There are a few fundamentals that must be in place for such a scheme to function, according to Giles, the most important of which is that all the different actors in the chain are on board. That means that as well as the retailer and farmers, the milk processors also had to participate, or in the case of the poultry industry, the packers. “If you only have two out of three it won’t work,” says Giles. “You need that desire to make it work through the supply chain.” Then, you need to establish which key inputs are going to be tracked, and by whom. “You need to have confidence in the modelling, and that it is independent and robust,” he adds.
Tesco, it should be acknowledged, is already running a poultry feed model, which adjusts to price changes in the market, and in 2022 it announced five-year contracts with its five main British shell egg suppliers – Anglia Free Range Eggs, Glenrath Farms, Griffiths Family Farms, Noble Foods and Skea Eggs. All eyes are on other retailers to make similar commitments.
Giles sees similarities between the precarious state of the poultry sector now and the crisis faced by dairy farmers back in 2007, although he cautions that things are even more complicated today given producers have also had to grapple with the challenges of Brexit, Covid, the Ukraine war and avian flu. Inflation hasn’t happened overnight, he points out, but neither has the complacency with which many people have taken the nation’s food security for granted. It was notable that former MI5 chief Eliza Manningham-Buller told the recent Henry Plumb Memorial Lecture that food is a part of the nation’s critical security infrastructure and that the future of British food is under threat. “We have already seen the egg supply chain crippled under the pressure caused by these issues [of soaring energy costs and workforce shortages] and I fear the country is sleepwalking into further food supply crises,” she said. “We need government and the wider supply chain to act now – tomorrow could well be too late.”
Sustainable future?
The concept of joined-up thinking and togetherness being at the heart of a functioning sector is one that industry leaders are keen to promote. “At the root of a sustainable egg industry is a supply chain that benefits everyone involved, and that is something I believe is achievable,” says Williams. “The British industry is proud to produce eggs to the world-leading standards of the Lion scheme, and British consumers want to keep enjoying Lion eggs. In order to achieve that, we need a robust sector with all stakeholders focused on delivering a sustainable future. We wish to further increase our self-sufficiency, which is already higher than many other food products. To ensure that the egg supply chain can be sustainable in the longer term, each part needs to be profitable to enable future investment to take place.”
Fairburn believes a sustainable UK egg industry is one in which “producers, packers and retailers achieve an adequate, stable return, and customers pay a fair, affordable price for high-quality, high-welfare UK-produced eggs.” He concedes that is a scenario which will lead to consumers having to pay more.
Ultimately, everybody is acutely aware that the time for collaboration is now. Positive things are starting to happen, but for the sake of the future of British egg supply, that needs to accelerate in 2023.
