British chickens may have to start laying smaller eggs

Section:

Market Ingredients Put
in Place for a More Costly
full English Breakfast

By Carl Mortished
The Times, London
Friday, September 14, 2007

http://business.timesonline.co.uk/tol/business/industry_sectors/consumer...

The cost of a cooked British breakfast is about to surge as price inflation grips the animal feed industry and threatens to create shortages of food staples, such as eggs, as well as soaring bacon, dairy and bread prices.

The inflationary spiral in wheat, which last month forced up the price of a British loaf, is creating havoc in the farmyard.

A leading UK egg producer, Noble Foods, gave warning yesterday that farmers were quitting the egg business, unable to afford the cost of feeding hens.

Noble, which supplies about 40 percent of the UK market, said that a number of its producers were cancelling orders for chicks to be raised ahead of the Christmas laying season, raising the prospect of egg shortages for the first time since the Second World War.

"Farmers are deciding not to buy pullets. There could be shortages in the market in the weeks leading up to Christmas," Finn Cottle, the marketing director, said.

Egg consumption rises by 50 percent in the run-up to Christmas, as families have more cooked breakfasts in winter and bake cakes.

The cost of animal feed, mainly wheat and soya, represents half the cost of keeping hens and those ingredients have doubled in price over the past year.

Pig farmers are also feeling the effect of soaring commodity prices and are demanding stiff price increases for pork.

According to the British Pig Executive, farmers are getting L1.10 a kilo for pigs that cost L1.44 to produce, a loss about L23 per pig.

To make up the deficit, the organisation representing British pig farmers reckons that a typical packet of bacon needs to increase by 13p in supermarkets.

Climate convulsions, politics, and changing diets around the world are raising the cost of the staples of a British shopping basket.

The price of a bushel of wheat has more than doubled on world markets in a year, rising at an alarming speed over the past month.

The grain price is setting records every week just as egg farmers enter contracts for animal feed, typically renewed in September.

If the business of producing eggs is to get back on an even keel, farm gate prices must rise by 25 percent, says Noble. That translates into an extra 20p on six free-range eggs on a supermarket shelf.

Without the prospect of price increases, egg farmers may choose to put their money elsewhere, such as in arable farming, where profits are soaring.

Tom Vesey, chairman of the British Free Range Egg Producers Association, said: "They are hesitating about committing to their next flock, which means that further down the line we will have a shortage of free range eggs."

Expensive wheat is affecting livestock farmers worldwide and last month forced mass-market bakers in the UK to raise the price of a standard loaf by 8p.

Associated British Foods, which owns Allied Bakeries, gave warning last week that the increase was insufficient and analysts are expecting further increases to take the cheapest loaf well above L1.

Dairy farmers are also feeling the impact of feed costs.

The price of skimmed milk powder has doubled on world markets and in the UK dairies are extracting higher prices from supermarkets as they suffer milk shortages because of the early summer flooding.

Supermarkets are trying to absorb the price increases and, according to the Milk Development Council, the stores are selling butter to shoppers at less than cost.

First Milk, a leading farm cooperative, declared force majeure at the end of last month, warning customers that milk supplies would be falling 5 percent short in its second such warning this summer.

* * *

Join GATA at these conferences:

The Silver Summit
Thursday-Friday, September 20-21, 2007
Coeur d'Alene, Idaho
http://thesilversummit.com

New Orleans Investment Conference
Sunday-Thursday, October 21-25, 2007
New Orleans, Louisiana
http://www.neworleansconference.com

* * *

Help Keep GATA Going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at http://www.gata.org/.

GATA is grateful for financial contributions, which are federally tax-deductible in the United States.