Supermarkets are rationing eggs. It’s a headline we might have expected at the start of the pandemic, but to be in this position now is scandalous. And there’s a real danger the reputation of supermarkets will be trashed with consumers if they don’t sort this out soon.
As flocks have plummeted, from 44 million to 36.7 million birds [BFREPA], Sainsbury’s has, without warning to suppliers, started importing eggs from Italy (in contravention of its commitment to stock only free-range eggs). Morrisons is also rumoured to be exploring a similar arrangement with egg suppliers in Poland. But all supermarkets brandishing support for British farmers have skin in the game.
As long ago as March, as the war in Ukraine broke out and feed and fuel prices soared, egg farmers said without a 40p per dozen increase, they would not renew their flocks, BFREPA predicting a 30% egg shortage by Christmas. The industry’s response? By the end of August the price to farmers had increased by just 7p-8p/dozen on average. In the past couple of months it’s increased to an 18p average.
Today Tesco pledged a further £14m in ‘support’ payments to egg packers. That follows a further ‘investment’ from Waitrose earlier this week. No doubt other tokens of belated appreciation (or ‘aid’ as some are calling it) will emerge elsewhere.
But it’s all too little too late, even with more price hikes for shoppers in the past couple of weeks. The chickens have come home to roost. Or at least the farmers have.
This is not about avian flu. This is egg producers without mortgages choosing to wait before renewing their flocks, while other egg farmers less fortunate, with no cost-plus contract mechanism, lose money with every egg they sell – 29p per dozen eggs in fact, according to BFREPA – with long-term contracts signed with packers meaning they can’t sell them to another packer that’s prepared to pay more.
What’s particularly scandalous is shelf-edge prices on eggs have gone up so much more, about 50p per dozen (and six free-range eggs rose 58p, or 48%, in the 24 October Grocer 33). So much for prices being ”constrained by the consumer” as the BRC claimed in its role as the industry’s henchman. Someone, somewhere is trousering the rest, with supermarkets blaming processors, and processors saying it’s the other way round.
It’s clear the system is broken. Without proper cost-plus contractual agreements (including heating, which nonsensically has been omitted from CPI negotiations in a number of sectors), supermarkets have had egg producers over a barrel, compounded by the number of packers almost doubling in the past 10 years. So supermarkets can play them off against one another, with no transparency over pricing whatsoever. No wonder farmers are saying supermarkets don’t care.
The NFU is calling for state aid. Supermarkets would do better if they sorted this for themselves. For their own reputations if nothing else. We’ve seen retailers take a lead on this in other sectors where continuity was vital, most notably milk. It’s time they stood up in support of their egg suppliers too. Or the number of egg suppliers closing will follow the same trajectory as pubs.
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