Sainsbury’s free range hens

Source: Sainsbury’s 

The main challenge is to secure insurance against avian influenza following a record year of bird flu last year

Egg supply has improved in recent months but there are still significant risks to the supply chain, British Free Range Egg Producers Association CEO Robert Gooch has warned.

The supply of eggs had risen since February and March due to an increase in the price paid to farmers for their produce, said Gooch. However, producer confidence was still not as high as it should be after a punishing year, he added. 

“It does take time and there are still some producers who lack confidence about going back in because they don’t want a repeat on what happened last year when they lost a lot of money,” said Gooch.

Last year saw a significant contraction in egg supply as farmers shut hen houses due to soaring production costs that were not matched by retailers. The top 20 egg producers and packers registered to the BEIC made a collective loss of £20.3m in their most recent accounts, according to analysis by The Grocer at the turn of the year. 

But the main challenge now was to secure insurance against avian influenza following a “worst ever” year of bird flu in the UK in 2022.

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“Either [insurance] is not available, so some brokers and some insurers have just come out of the market all together saying it is a risky market,” said Gooch. Or those few “low risk” farmers who are able to secure insurance from the limited providers available have seen premiums rise substantially. 

The inability to secure cover was even more critical for farmers than the financial difficulties they had faced, he argued, as “if it is just an increase in price then producers can make a decision at least whether it is worth it or not but if they don’t have the choice there is nothing they can do”.

Without better insurance availability, some producers are not restocking due to lack of confidence and “there is nothing farmers can do about it”.

Gooch said there had been a recent government roundtable around insurance and avian flu, but that it still was not clear what would come out of it.

Commercial layer volumes, according to the latest set of data from Defra, have increased by 17% year on year, up to 9.5 million eggs in May 2023 compared with 8.1 million eggs in May 2022. This was also a rise from March, when the number was 7.1 million. 

But farmers are still under pressure due to a lack of pullets, from which laying hens are reared, and have been slower to catch up. There are now farmers who would like to get pullets but “still can’t to restock”, Gooch suggested.

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Contracts are also changing, with more retailers and packers taking on contracts, which take some of the risk away from farmers. The ’cost-plus’ contracts ensure retailers and packers pay for changes to input costs, rather than farmers.

These have started to be adopted but more needed to be available so “it reduces the risk to the farmer so he has more confidence and he is not going to get burnt”, Gooch urged.

It comes as the government recently announced a review into fairness within the egg supply chain, which Gooch said would give “impetus to improve contracts and then improve producer confidence”.

“We have been calling for it for a year so the fact that we have got it is a great step forward and how the process works and how it actually delivers confidence and benefits to producers is something we will have to wait and see,” he added.