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Australian Egg Producers Enduring Skyrocketing Feed Cost

09/07/2018

A severe drought in Australia caused by an El Nino event has resulted in substantial increases in feed cost shaving margins. A similar situation exists in the E.U. as a result of the prevailing drought which has reduced wheat and canola yields.

 

From news reports, it does not appear that supermarket chains will raise prices to compensate farmers.  Chains hold prices to maintain sales volume and are disinclined to pay more for their product which would reduce store margins. 

 

The situation in Australia and in Western Europe is a direct manifestation of supply and demand economics.  If less efficient producers either curtail or cease production, supply declines resulting in price increases ultimately benefiting more efficient producers.

 

The fact that Australia has a high proportion of free-range pastured hens does not help producers who adopted the system in response to perceived consumer demand.