Tesco has responded to the growing financial crisis gripping the egg sector by issuing new, five-year contracts to all five of its shell egg suppliers.
The retailer said its new supply deals with Anglia Free Range Eggs, Glenrath Farms, Griffiths Family Farms, Noble Foods and Skea Eggs “reaffirmed” its commitment to UK egg farmers and guaranteed British egg sourcing amid “challenging market conditions”.
It would help “provide UK egg farmers with the confidence to invest and plan for the future”, Tesco added.
The new arrangement meant Tesco would also continue to use its “industry-leading” poultry feed-tracker pricing model, which paid producers up to 70% of the cost of production on egg and poultry farms, it said.
“To tackle fluctuations in prices, Tesco introduced a fair and transparent feed model into its poultry and egg supply chains 10 years ago,” the retailer pointed out. “The model promotes open dialogue between Tesco and its suppliers and adjusts to price changes in the market, providing suppliers with the protection and security they need when buying feed.”
Tesco’s commitment follows warnings earlier this month by the British Free Range Egg Producers Association that supermarkets could face shortages before the end of the year unless producers were paid above the cost of production.
Soaring feed costs were in danger of tipping producers over the financial edge, the trade body warned, with BFREPA research in April revealing 70% of its members would leave egg production within a year if their “ruinous” situation was not resolved.
Tesco knew “we need to do more to support our egg farmers”, said the retailer’s commercial director for fresh, Dominic Morrey.
The new, long-term contracts and its feed-tracker pricing model would “provide the industry with protection during these uncertain times”, he suggested, before adding Tesco hoped they would also help its producers achieve its aim of switching to 100% cage-free eggs by 2025.
British Egg Industry Council CEO Mark Williams described the move as an “encouraging” and “long-term and sustainable approach to its egg supplier relationships at a very challenging time when costs are running so high”.
The support follows a commitment by the retailer to pay more for its milk in March, while it also announced a major cash injection for pig producers earlier this month.
BFREPA also welcomed the move, though its CEO Robert Gooch urged the retailer to go even further, and said the body would “hold” Tesco to its commitment to British eggs “when, as we fear, shortages of British free-range eggs arise later this year”.
Tesco’s feed tracker model was “best in class and is nothing new, as it has been in place for many years”, Gooch added.
“Tesco provide the feed tracker to its packer suppliers. However, its five suppliers do not offer it to all their producers,” he claimed.
“Tesco must insist that all its packers pass on the benefit of the feed tracker to all their contracted producers. Moreover, the feed tracker does not cover the massive inflation in energy, fuel and labour which producers are facing, and this still needs to be addressed in the egg sector, as Tesco seems to have done to their milk and pork producers.”
The best way to ensure a sustainable supply of British free-range eggs was “to pay a fair price for the product using a cost of production model which must be offered to every one of Tesco’s egg farmers”, he insisted.
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