The drive by celebrity chefs and animal welfare groups to get shoppers to switch to free-range eggs is threatening producer prices, industry experts have warned.

Regulations introduced this year allowing free-range egg producers to stock 2,000 birds per hectare instead of 1,000 is leading to increased production. And as the popularity of free-range eggs increases among shoppers, a growing number of farmers have been clambering to get into the more lucrative sector.

The net effect is that the market could soon be flooded, warned Phil Crawley, director of free-range producer Sunrise. "Up to now there has been a shortage of free-range eggs but overproduction is now potentially there and that would have a downward pressure on prices," he said.

Sales of free-range and organic eggs made up 43% of eggs packed in the UK in the first quarter of this year, according to Defra, up from 39% last year. The number of new producers was growing particularly strongly in Wales and Scotland where grants were available for agriculture diversification projects, said John Retson, chairman of the British Free Range Egg Producers Association.

The industry was moving towards a tipping point as free-range eggs crept towards half of all egg production, said Rob Newbery, chief poultry adviser at the NFU. "We are in a period of volatility and free-range eggs are growing both in terms of production and popularity, as well as increasingly being an ingredient for food manufacturers looking for a point of difference." He warned that new entrants to the free-range market should only enter if they had secured long-term supply contracts with reputable processors. "There is now the potential for the production base to grow ahead of demand."

Misinformation over new legislation banning battery chickens from 2012 is also thought to be causing some producers to believe going free-range is obligatory. They can, however, install 'colony cage' systems, which will be legal.