Disinclination by many U.K. supermarket chains during 2023 to adequately pay producers of free-range eggs resulted in shortages in this category. U.K. consumers have a preference for eggs produced in their nation and express a preference for free-range product.
Lidl, the 7th largest grocery retailer, has entered into long-term supply agreements with groups of farmers based on production cost, margins and with adjustments for increases in feed, labor and utilities. Approximately, $1.5 billion will be budgeted by Lidl to support sourcing of eggs over a five-year period.
The action by Lidl will be followed by other chains, some of which have developed their own programs to ensure supply. The outgoing Conservative government was instrumental in highlighting the plight of egg producers by establishing a Commission of Inquiry into the relationship between producers and retailers.
Since the debacle of Brexit, U.K. livestock and poultry producers have been at a disadvantage with respect to the E.U. over the cost of ingredients and labor. In recent years, many expatriate agricultural workers have returned to their homelands depriving farmers of available labor. Fallout from Brexit resulted in inflation adversely affecting egg farmers disproportionately to other sectors of agriculture. Retail chains inappropriately attempted to maintain margins while offering low prices by failing to pay a fair price to packers and indirectly, to farmers. There is an obvious learning lesson in the U.K. situation that is applicable to the U.S.