The organisation representing free-range egg producers has called on members to put the brakes on expansion or face the prospect of falling returns.
The warning follows the publication of an independent report by ADAS for the British Free Range Egg Producers Association (BFREPA) which showed that if the sector continues to expand at the current rate it will result in significant oversupply, leading to reduced prices and profitability for farmers.
BFREPA chief executive Robert Gooch said: “There is an incorrect assumption from many in the sector that retailers moving away from colony eggs will lead to a surge in demand for free range.
“That is simply not the case, and this report confirms that.
“We have been warning for many years that rapid expansion will create a situation of oversupply. All the while, the price paid to farmers has diminished and is now 20% lower than it was five years ago.
“The trend is clear: as production has increased, the price paid to farmers has decreased.
“This situation is unnecessary and unsustainable.”
Free-range production has increased by 14% since 2017 to nearly 25 million hens but the report predicts a production increase of only 2% is required over the next five years to meet a forecast growth in free-range egg demand of 300,000 cases.
Meanwhile, BFREPA says entrants to free-range egg production are being tempted into the sector with contract bonuses which are not sustained.
Mr Gooch said a model contract was made available to all free-range egg producers last year to help secure sustainable prices for the long term, and a new online costings portal has also been introduced to enable farmers to compare their situation with others across Great Britain and Northern Ireland.
From the data put in so far, BFREPA says most free-range egg producers are not breaking even.
Mr Gooch added: “Our data from ADAS shows a break-even price of £1.01 per dozen, but our members are submitting prices through our portal which show that they are being paid significantly less than that – about 88p per dozen on average.
“There is a huge range of producer prices in the market, ranging from below the cost of production to good prices to tempt new entrants into the sector.
“Given this variability, this portal provides the sector with some transparency about what is happening in the supply chain, particularly for retailers who will be able to see if the cost of production price increases given to packers are being passed down to contracted producers,” he added.
