UK Agriculture Outlook 2022: Risks and rewards ahead for poultry sector (Nigerian Farmers can learn a lot here)
Better branding of poultry products is needed to make them more attractive and easily understood by consumers, according to the annual Andersons Outlook report.
Vertical integration of the poultry supply chain has reduced the number of steps between producer and consumer, but there is still a significant gap.
Andersons farm business consultant Edward Calcott says there is a big disconnect between the farmers who produce poultry and customers who eat it.
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See also: Outlook 2021: Poultry market risks and opportunities
“The humble chicken has lost its identity. It is on par with milk – a brandless commodity product that is a household staple,” he says.
“Instead, we have ‘tiers’ of welfare. There is Red Tractor assured; RSPCA Assured; Room to Roam; Indoor; British Indoor; British Indoor+; Free Range; and Organic to name a few.
“Then we have the Better Chicken Commitment, which has good intentions, but a slightly controversial and corporate name – does it mean that chickens not reared to the BCC standards are bad?”
Eight things that will improve your poultry business
Minimise overhead costs
Set goals and compile budgets
Compare yourself with others and gather information
Understand your market requirements and meet them
Have a mindset for change and innovation
Attention to detail
Continually improve people management
Free-range eggs, such as those from the Happy Eggs Co, fare better on the branding front, he says.
“’I’ve got some happy eggs for tea’ sounds a lot more appealing than ‘I’ve got Better Chicken Commitment chicken for tea’.”
While branding is something the industry can control, labour availability is not as easy to manage, and this could be impacting broiler placements.
Chickens hanging up in processing plant
© Pantovich/Adobe Stock
Plus, there’s Brexit, Covid-19, carbon dioxide for stunning, logistics issues, trade deals, feed prices, and climate change aspirations.
“High feed prices are definitely affecting margins, but there is not a lot that can be done about them.
“Make sure the quality of feed is what you are ordering as there may be a chance of cheaper inputs being included,” advises Mr Calcott.
Following hard on the heels of the COP26 climate change conference, a battle is likely to develop between those seeking to improve welfare standards and those with ambitious climate footprint aspirations, says Mr Calcott.
“The Better Chicken Commitment requires a lower stocking density [than standard production] – but the lower the stocking density, the higher the carbon footprint, so it is a bit of a trade-off. I don’t think customers understand it.”
Day to day, there are steps growers can take to protect and improve their poultry businesses, says Mr Calcott. “To minimise overhead costs, producers can shop around for basic things such as insurance and electricity.”
“Broiler production, in particular, is being negatively affected by high energy costs. Farmers can track costs month on month to see where anomalies occur. If you don’t measure it, you can’t change it.”
Setting goals and budgets
“A lot get carried away in farming and don’t know their end goal. Do you wait for the tax accounts at the end of the year or budget and monitor your finances closely?”
Comparing businesses by benchmarking internally and externally can help reveal areas for improvement, he suggests.
“You might choose to compare one flock with another flock or with other farmers. Also understand customer requirements, such as size, weight and quality.”
Being open to change and innovation is increasingly important.
“There is a lot of technology, for example, for checking weights, managing ventilation and generating renewable energy – as well as mechanisation to reduce reliance on labour.”
However, mechanisation can only go so far in substituting labour, and keeping staff happy is key to retaining them, says Mr Calcott.
“Recognise the non-financial goals of employees – it might be flexible working, taking them out every couple of months or allowing them an acre to keep a horse on.
“Involve them in the financial aspects of the business – what is going on and why it is happening.”
Specialising in a particular area of production can help to refine systems and fill a niche. “A lot of poultry farms specialise anyway rather than being a Jack of all trades,” he says.
“Attention to detail – getting the basics right and building on that – is key. Next year will be an interesting one. Be good at what you do because being average may not cut the mustard.”
Chick and poult placements
UK broiler chick placings fell by about three million between June and August 2021.
Reduced availability of labour across the whole supply chain – hatcheries, logistics, farms, factories and processing – is behind the drop.
“I think a few cogs in the wheel have trimmed back a little so they are not working at 100%, to allow for one or two people missing from the operation and to give the people who are left a bit of an easier time,” says Mr Calcott.
Egg prices set to pick up
Egg prices have been on something of a roller-coaster over the past year. Having reached a high 12 months ago as baking took off during lockdown, they then eased back after a more challenging year.
But next year prices are set to rebound, says Andersons partner Lily Hiscock.
“Prices should increase due to fewer chick placements; and feed prices are so sky high that processors are having to pay more to get their eggs.
“Processors are renewing contracts, pushing retailers up on price, some of which should pass back to the producer,” she explains.
“Prices had crept down to 90p/doz or under but are coming back 3-4p higher in the new year,” she says.
With many retailers and processors set to move away from colony eggs by 2025 – if they have not already done so – producers are rushing to erect new units for free-range hens.
“However, there are difficulties in securing planning permission in some areas, says Ms Hiscock.
“This is mainly connected with environmental concerns, with phosphate restrictions being a big one, halting growth of free-range egg businesses in areas such as Somerset and Herefordshire.
“Some producers are moving north, where there are not the same problems at the moment.”
With free-range layer units taking up more space than colony farms, more units are needed, says Ms Hiscock.
“Otherwise, the growth we’ve seen will slow. Some have talked about barn egg production, but this is an expensive solution and not one consumers will go for. So free-range becomes the value egg that could go down in price over time.”
A current threat to free-range egg production is avian flu, says Duncan Priestner, NFU poultry board member who farms 120,000 layers near Manchester.
UK egg statistics
7.8m cases of eggs were packed in UK egg packing stations during the third quarter of 2021. This represents 1.7% increase on the third quarter in 2020 and a 0.9% decrease on quarter two 2021
The production of egg products during the third quarter of 2021 totalled 21,400t, a 0.6% increase on the previous quarter and a 19% increase on the third quarter 2020, as consumers ate out more when Covid lockdown restrictions eased
“It is a concern every year and many months of every year, locking birds up. Eggs lose their free-range status after 16 weeks.”
While wholesale egg prices are up 20%, they are only “where they should have been last year” and costs are currently a major concern, says Mr Priestner.
“Chicks have gone up 5% on last year. There have been three increases in packaging costs recently, totalling 40%.
“Electricity is on a two-year contract and has gone up 20%, gas for the rearing sheds is up 54% and fuel has gone up 19%. Feed is £84/t up on 12 months ago – that’s 37% or 17p/dozen.”
Securing labour is also more difficult for poultry businesses and with the minimum wage going up 6.6% in April, more expensive, he adds.
Broiler enterprises are also facing rising input costs, putting margins under pressure, says Ms Hiscock. “Margins are so thin that unless there is a price uplift, some will stop producing chickens.”
CONTRIBUTED BY Tim Scrivener