Feed, largely wheat and soya, makes up around 60% of the production costs for poultry and eggs, and with spot prices having reached £226/t and the wheat futures market showing a March 2013 contract price high of £197/t, there is only one way production costs can go: up.
“We have a very robust poultry industry, which has invested to improve efficiency, but these are monumental price rises we are talking about,” BPC chief executive Peter Bradnock told FoodManufacture.co.uk. “You can’t absorb the kind of price rises we are talking about through greater efficiency – it’s impossible”
Reluctant
Bradnock admitted the £440M figure is “conservative”, given that it didn’t factor in the spot price market. However, he said it wouldn’t be until the autumn, when more detail is known about the 2012/13 harvest, that more accurate figures would be available. He was also reluctant to predict what the rises could mean for the price of poultry and eggs on-shelf.
In a letter to the main retailers, the BPC, NFU and the British Egg Industry Council warned of the rising costs. It read: “The year ahead will constitute a continued challenge to our supply-side costs and the poultry supply chain has worked hard to manage the unprecedented levels of volatility that have characterised agricultural markets since 2007.
“It is in all our interests to maintain long-term sustainable chains. We ask that you reflect the fundamental change in commodity prices that will impact poultry industry costs when in pricing considerations and promotional schedules for the year ahead.”
Aggressive pricing war
With retailers involved in an aggressive pricing war, some may be tempted to look overseas for produce. However, analysts warned that there will be “no hiding place” from the rises.
“If retailers want UK produce then the price is going to have to go up,” said Ashley Clarkson, associate director in Grant Thornton’s food and beverage team.
“The prices will go up around the world and there is no hiding place. ”The price rises have been caused by drought in Europe, the US and the Black Seas region, which UK producers are heavily reliant on for feed. This has coincided a delayed harvest in the UK due to wet conditions.
“There is a nervousness around the quantity and quality of feed that will be available this year,” said Clarkson. “It might not be affecting producers today, but it will when they start negotiating their contracts.”
The British Poultry Council (BPC) has predicted that feed prices in 2012/13 could cost UK poultry producers £440M more than last year as a result of the hot and dry weather conditions in the Northern Hemisphere, which have hit yield potential.
