Chicken prices are set to rise this autumn, with British processors already locked in a round of negotiations with the multiple retailers.

The supply chain is coming under pressure from a combination of high energy and feed costs and Charles Bourns, NFU poultry board chairman, claimed that many growers are now producing at a loss. He said farmers needed above-inflation increases in order to cope.

"It's absolutely crucial," he said. "If we don't get this price increase through then farmers will go out of business."

The poultry industry has footed an estimated £58m bill for promoting chicken through the bird flu outbreak that hit Europe in the spring. And with steep charges coming in from the start of next year to tackle pollution and comply with new controls, producers and processors had very little financial flexibility left, Bourns added.

"Avian influenza may come back this autumn, but we couldn't afford to fund another promotion." A spokesman for Tesco would not confirm whether it had agreed on a price rise, or even if discussions were taking place.

But he said the retailer recognised that there was cost pressure on producers.

"Producers are coming into autumn and winter, when costs are at their highest. Our prices must always reflect cost, but they can't have a direct link to customer prices."

Bourns claimed that the retailers were as keen as any in the chain to see an increase, because price promotions had actually stripped growth out of the whole category.

He pointed to data showing that poultry sales rose just 2% (below the rate of inflation) to £1.57bn over the past year [TNS 52 w/e 16 July] - diluting the sector's value in real terms.

Farmers needed some 7p/kg more for their birds, Bourns added. NFU costings taken in May showed that the minimum sustainable farmgate price was 55p/kg, whereas current prices averaged 48.5p/kg.