Britain’s Broken Egg Industry Reveals the Cost of Food Inflation, Reports Reuters

By James Davey

LONDON (Reuters) – The impact of soaring inflation in the UK is starkly evident in the plight of the once-ubiquitous egg.

The war in Ukraine has significantly raised energy and feed costs for chickens, prompting farmers to voice concerns about inadequate payments, which have disrupted the economics surrounding this essential food item.

Supermarkets across the UK, including major players like Tesco and Asda, have introduced sales limits, citing a recent outbreak of bird flu that has affected poultry populations throughout Europe and the United States, leading to a perceived shortage in Britain.

However, British farmers contend that while the bird flu situation is a contributing factor, the real issue is their financial losses on egg sales, resulting in many scaling back production or exiting the industry entirely.

"The absurdity is that we’ve warned retailers and given ample notice about this crisis," said Robert Gooch, chief executive of the British Free Range Egg Producers Association. The association estimates that the UK’s laying flock has decreased by 6%, now totaling 36.4 million, indicating that supply may tighten further.

Frank Thompstone, a farmer in Burton-on-Trent, reduced his free-range hens from 36,000 to 24,000 last year to stem his financial losses. By October, he chose to terminate his contract with a buyer, who responded by slightly increasing the payment—yet, according to Thompstone, the new rate still results in a loss for him. "Why would we commit to that?" he expressed, adding frustration over the power retailer’s hold on pricing.

In response to consumer demand, British egg producers have shifted focus to free-range practices, which now account for 70% of the market. This contrasts starkly with just 13% of eggs in the European Union being free-range, limiting the ability to import eggs to fill supermarket shelves.

The National Farmers Union (NFU) warns that the current egg shortage could signal broader issues ahead, as increasing energy and grain costs, coupled with labor shortages, could lead to more empty shelves unless producers and retailers reach equitable agreements moving forward.

While double-digit inflation has strained producer-retailer relationships globally, fierce competition among UK food retailers has kept prices lower than European counterparts, resulting in thin profit margins for retailers.

Despite retailers raising retail prices and compensating farmers more, producers argue that the increases do not keep pace with skyrocketing production costs. The NFU revealed that although British producers receive 35% more for their eggs than they did in 2019, chicken feed costs have surged by 90%. Recent official data indicates that retail egg prices have climbed by 27% over the past year.

Farmers like Daniel Brown, who operates a farm in Bury St Edmunds, share these concerns. Although a recent price hike of 18 pence per dozen offered some respite, he continues to operate at a loss. "We’ve clearly explained to retailers why prices must rise and the associated costs, but they simply ignore us, leading to the situation we now face."

Last month, Tesco, Aldi, and Waitrose collectively contributed £29 million towards supporting the egg industry, while the British Retail Consortium acknowledged the necessity of sustainable farmer pricing despite rising costs on their end.

Brown plans to decide by April 2023 whether to restock his flocks but cautioned that production capacity is unlikely to recover in the near term. "Even if retailers came back with an attractive offer, such as an additional 70 pence per dozen, it would still take six to eight months to rear sufficient birds to replace those lost," he noted.