‘Cost-linked’ egg contracts launched by Sainsbury’s

Retail group Sainsbury’s is promising its egg producers “greater financial security in a volatile market” with the launch of a new producer group and prices linked to the cost of production.

The Sainsbury’s Egg Group will launch in September and will work in collaboration with the supermarket’s three main egg packers, The Lakes Free-Range Egg Company, Yorkshire Farmhouse Eggs and Skea Eggs.

Over 100 egg producers will be involved.

See also: Free-range egg labelling rules eased for bird flu outbreaks

Sainsbury’s says it will take “a leadership position on pay for egg farmers” by committing to always pay the cost of production “or above”.

“This hopes to provide financial reassurance in a volatile market, giving farmers the confidence to invest in future business advancements,” it said in a statement.

Positive margins 

While industry costings from the British Free Range Egg Producers’ Association (Bfrepa) show that most egg producers are already seeing positive margins, it should avoid the situation seen in 2022 when rocketing input costs left many producers deeply in the red.

In return for a more secure contract price, Sainsbury’s will be looking for a continuous drive towards better bird welfare and a commitment to carbon reduction.

Group members will also be expected to conduct an annual carbon footprint assessment.

“Many farmers involved have already started making progress themselves, such as reducing soy in feed, and making moves towards renewable energy, including the use of solar panels and heat pumps,” said the statement.

Data sharing

Sainsbury’s is also keen to engage in data sharing and information exchange, much as it has done with its Dairy Development Group for over 15 years.

Gavin Hodgson, director of agriculture at Sainsbury’s, said: “We know how important eggs are for our customers, but we’re also aware of the challenges facing egg farmers, such as increased production costs and sustainability targets.

“The new Sainsbury’s Egg Group aims to further support farmers, helping shift to more sustainable and resilient production.”

Reaction 

Egg producer and Bfrepa chairman James Baxter, welcomed the retailer’s involvement in ending the cycle of “booms and busts” that producers have endured.

“The last cycle of busts took many producers close to bankruptcy and left retailers short of egg,” he said.

“No retailer or packer should pay less than the cost of production, and we encourage retailers to scrutinise contracts much more closely, ensuring that they never go below this independently assessed level.”

Mr Baxter added that market conditions should determine producer margins, not just a fixed margin added to the cost of production.