Only the “top quartile” of the sector’s chicken farmers were currently making enough cash to continue producing in the long term under current financial conditions, said Jo Hilditch, MD of Herefordshire-based Whittern Farms.
Many producers were “not restocking” birds in the face chronically low returns and soaring costs, Hilditch said. She told The Grocer she had been forced to “put money back into the business from my private reserves”.
Her business produces about six million birds a year from three different farms and supplies conventional indoor-reared broilers to a number of customers, including Tesco, via processor Avara Foods.
Hilditch and her family boast a long-standing history in the poultry farming-sector, with her father one of the original founders of former chicken giant Sun Valley – a business that was ultimately acquired by Cargill, which then formed Avara in a joint venture alongside Faccenda Foods in 2017.
But amid soaring input inflation and challenges such as bird flu, she said her company’s costs and those of many more growers across the sector were “not paid for by our income”.
This had been made worse by the government overlooking the poultry sector in its watered-down Energy and Trade Intensive Industries funding scheme last month.
Poultry farmers currently received around £1.18/kg for a 2/2.5kg roasting bird on the open market, with consumers charged around £2.27/kg for an average whole bird in supermarkets, Hilditch said.
But once the usual processing and retailing costs were subtracted, most chicken growing businesses saw as little as 21p/kg back, demonstrating there is “little or no margin if you are an average grower”, she added, making it increasingly unviable to produce chickens.
Kantar data [52 w/e 27 November] shows average fresh whole chicken prices rose by 11.2% last year, with some chicken cuts rising even higher.
However, Hilditch – who is calling on supermarkets to push up prices even further and pass on greater returns down the supply chain – said her production costs had risen by about 30% over the past year, with more to come as the government’s current energy support package came to an end, so “someone is being squeezed”.
She was certain “we will make a loss this year”, a position many more producers found themselves in. And many – particularly those with no finance to pay off – may decide they “would rather not have birds in their sheds costing them money”, she suggested.
“The bank manager is coming with a crisis team to discuss how we are going to manage our way through this situation,” she added, with others around the sector in similar positions.
“When I go to a supermarket, I find it very frustrating you can buy two chickens for £8 when I know how much they cost to produce,” she said.
“The chicken growing sector is very progressive and we have never been supported by any subsidies. We don’t expect to either, but we need a fair price, otherwise the writing will be on the wall and there won’t be any chicken if [the supermarkets] are not careful.”
Her comments come a week after major processor 2 Sisters Food Group – which has echoed her calls for greater returns from supermarkets over the past year and half – announced it was closing its factory in Llangefni on Anglesey, citing rising costs. More than 700 jobs are at risk.