February 2007
Open letter to the Editor of The Grocer, Adam Leyland
Cc Richard Allison, Editor, Poultry World
Cc Charles Bourne, Chairman NFU Poultry Board
Dear
Sir
I
was interested to read your article on retailer margins across a range of food
products, (The Grocer, 2nd February 2008). The figure for free range eggs, at 38% is
considerably higher than we could possibly achieve in agriculture, but I
suspect that the margin for organic eggs would be higher still!, I would just question whether such high
figures are really valid for organic eggs, bearing in mind the precarious
nature of the organic egg supply chain.
I
am concerned that the organic egg supply chain is on the verge of collapse. Am I being over dramatic? No, the chain is under enormous pressure due
to a lack of organic raw materials, and the resultant high price caused by the
shortage. Whilst farmers are having to pay escalating prices, the rest of the supply
chain is not allowing these higher costs to be covered.
Is
there anything that can be done about it?
Of course, but it will take the major UK retailers to recognize the
problem and help put in place a long term solution that will build a robust supply
chain capable of developing and prospering.
If retailers do not take the lead and pass on these cost rises to their
customers, the trickle of organic farmers who have already converted back to
conventional production will become a full flow!
The
facts behind this assertion are that
Since harvest last year, organic raw
materials have increased in price by between £100-200 per tonne,
or 24-48p/dozen eggs:-
When we contacted a number of major
suppliers of organic grains and proteins, none of them had sufficient materials
to sell. This is happening against a
backdrop of the requirement on 1st of January for a higher % of
organic materials in animal feeds. The
shortage of the materials has encouraged our French and Belgian competitors to
relax their organic % inclusion, giving them a cost advantage.
The high prices will ultimately paralyse the organic sector unless the costs can be passed
on to the consumer who wants to buy organic foods. It is difficult for feed compounders
to contract to buy forward (and that is the only way of securing supplies) if
they are concerned that the level of these raw material prices result in uneconomic
feed prices for customers. Feed companies
are currently discounting prices to keep their customers in business, but this
is a short term expedient in which financial risks are huge. The situation will only be fully resolved once
consumers bear the full price, rather than being protected by retailers’
reluctance to accept necessary cost price rises.
If
any supermarket has an hour to spare and is interested in exploring the new
economics of raw materials and feeds, including organic feeds, with the object
of preserving and nurturing the UK organic egg supply chain then please make
contact, otherwise there really will not be organic eggs on retail shelves in
the very near future!.
Yours
faithfully
Martin
Humphrey
Humphrey
Feeds Ltd
For more information contact:
Tel: 01962 764522
Fax: 01962 764511
Website: www.humphreyfeeds.com
Issued
by: Angus Chalmers 01452 429171 achalmers@rdp.co.uk