Planning applications disappoint packers

Published on : 10 May 2023

Italian producers were in a positive mood at their annual trade fair in Rimini last week

When asked how many planning applications for new builds or extensions had been submitted since the Ranger last spoke with him in January, Ian Pick from Ian Pick Associates replied, "Not a lot! We do have some bits and pieces coming in, but we have only really turned the corner in the last six weeks. We certainly have not been inundated with enquiries for any free range building applications, either as new builds or extensions. Given that borrowing rates are still upwards of 6% and with 40% inflation on build costs, we have a long way to go until recovery starts to take effect".

Ian explained that one client planned to build a 32k shed in East Yorkshire, setting them back around £2.2 million - this equates to more than £70 per bird. "We have had a few more enquiries that we have seen over the last year or so, but they are still few and far between."

Oliver Grundy from JHG planning also feels that "the sector hasn't improved massively. We still see high materials and energy costs precluding big investments in new units, although it is slightly busier than last year. We see many existing farms looking at renewable energy and sending in applications for ancillary renewable energy schemes".

Building commencements on hold
Where planning has been agreed upon, many producers have delayed the start of any build. Ian Pick advised, "We know of one farmer who gained approval in August 2021 for a 32k shed. They are only now starting to crack on with the actual build. An extension to a 16k bird Free Range existing complex in Driffield will proceed shortly".

Ian added, "There are a lot of empty sheds around. I know of one application by Warrens for three 64k units to be built by Morspan, which has been approved, but no construction has started yet".

Donald Gillespie from Morspan supports this view "The market has changed. We are looking at a lot of building work now which had planning granted two years ago. Farmers have been sitting on planning plans until the time was right to build, which seems to be starting to happen now. The market is starting to improve."

Pullet rearing maxed out
Martin Humphreys of Humphreys Feed and Pullets advised that while there may be few building applications in the pipeline, as far as pullet rearing goes for restocking, "We are at full capacity for pullets until the year-end."

"So many producers have fallen out of the natural cycle, either due to putting a halt on restocking until the prices improved or because of an enforced absence due to AI or Salmonella. However, as pullet rearers we cannot just switch on production to meet unplanned new demand. Other rearers are similarly full to capacity. It is just not possible to suddenly ramp it up as demand comes back.

We are going to continue to see empty shelves, with retailers struggling to get UK eggs, for at least 18 months until capacity gets back on track.

The Times reports that UK supermarkets are scrambling to stock up on Italian egg as the current egg price is not attracting new production.

UK egg farmers claim they slashed production as a result of rising costs and supermarket business terms forcing them to sell at a loss.

Italian producers were in a positive mood at their annual trade fair in Rimini last week, however. After inspecting the latest egg conveyor belts and cartons, industry leaders gathered for a seminar where latest figures showed the Italian market was in good shape, with prices rising 10 per cent and sales up 12 per cent last year.

"Over in the UK, supermarkets did not increase the prices they offered to local producers, who reduced production, creating a shortfall the market did not expect," said Sirio Lionello, 69, the president of Eurovo, Italy's largest egg producer.

Trouble started for UK producers when the Ukraine war tripled the price of feed, which accounts for 60-70 per cent of their costs.

Robert Gooch, chief executive of British Free Range Egg Producers' Association, said: "Last year it cost us £1.40 to produce a dozen eggs, but the supermarkets insisted on continuing to pay just £1, meaning many producers halted production to avoid selling at a loss."

The arrival of Italian eggs on UK shelves sparked anger from British producers and allegations that Italian barn eggs are kept in cages, albeit with the cage doors removed. "That's totally false, we don't do that — we keep nine hens per square metre as per European Union rules," said Silvia Lionello, a director at Eurovo.

Gian Luca Bagnara, head of Italian industry association Assoavi, said that Italian producers had been hit by the same rising feed costs as their UK counterparts last year and by the same reluctance by retailers to pay them more.

"The difference in Italy is that producers complained to the government, which invoked an EU rule prohibiting supermarkets from paying below-cost price. That rule helped keep us in business," he said.

Gooch said similar British legislation could have been used, but the UK government chose not to. "Our government is more interested in cheap food than food security," he said.

As shelves emptied in the UK, supermarkets offered local producers more, something they had tried to avoid.

"By November, they were offering to pay us more, making it worthwhile again, but by then, we had fewer hens, and we need three to four months to repopulate stocks," said Gooch. "We could have avoided all of this."