Egg prices may be rallying after their summer slump but UK producers face a bruising from an EU fudge over welfare rules says Mintec’s Robert Miles

This year has been an extraordinary rollercoaster ride for egg prices and egg producers. Last spring the average wholesale price of eggs in the UK was a near record high (£1,300/tonne), but in a dramatic slump over the summer, prices fell by more than 50% (£600/tonne) to levels not seen since mid-2007.

Now, egg prices are rising again as a result of a seasonal decrease in laying coupled with soaring feed price rises in the wake of poor wheat harvests in Russia, Ukraine and Canada.Unfortunately, these aren't the sort of price rises that strengthen a category and are indeed in danger of undermining much of the work done last year to add genuine value.

Successful promotions, increasing traceability such as the British Lion mark, and printing a best-before date on every UK egg all helped increase consumer trust and boost demand.

Problems such as salmonella had been addressed and the news that eggs were actually good for you, and not likely to cause high cholesterol, as once thought, stoked demand further.

But all the while, the boom in egg prices was being steadily matched by increases in the price of feed, heating, labour and stricter welfare legislation.

These quietly raised the cost of EU egg production, meaning margins did not improve nearly as dramatically as would have been expected.

There is now a feeling of uncertainty within the industry. Producers have been asking questions about where new EU legislation is likely to go and pondering the significance of reports that producers in some countries are lobbying to delay the introduction of the 2012 unenriched cage ban.

The start of 2012 might seem a long way off, but in terms of investment and putting the right things in place it is actually quite soon. A typical industrial egg cycle lasts between 17 to 30 months, so time is rapidly running out for producers to get their production systems up to scratch.

It is currently expected that as much as 30% of total EU egg production will not be compliant with the new regime. It remains to be seen what the consequences might be, but an EU fudge does look to be increasingly in the offing.

If the rules are enforced, a ban on 30% of production in the EU could be all too swiftly replaced by imported battery eggs produced outside the EU.

However, if non-compliant member states are given more time, eggs from different production systems would probably have to be put on to the market under the same label and this would be a serious economic impediment to those who have decided to comply.

Both scenarios would spell a serious headache for UK producers that have already invested heavily in making their systems compliant with the legislation.

If the investments don't stack up, we could all be paying a lot more for our eggs in the long term.