Near-record grain costs to push up WA egg prices

Melissa Williams and Bob GarnantCountryman
Supermarkets will have the option to absorb or pass on any price increases to their customers, experts say.
Camera IconSupermarkets will have the option to absorb or pass on any price increases to their customers, experts say.

WA egg producers are the first to flag potential retail price hikes across a range of fresh food staples on the back of near-record high grain prices in this State.

While grain growers stand to reap the benefits of the strengthening value of crops, local egg and meat sectors say consumers at the checkout might have to absorb some of their rising grain input costs.

This week, Commercial Egg Producers Association of WA president Ian Wilson said the State’s egg farmers needed about 20¢ more per dozen to carry higher feed costs driven by a drought-induced national shortage of feed grain.

“Supermarkets will have the option to absorb or pass on any price increases to their customers,” he said.

“With WA grain in high demand throughout Australia, the flow-on effect of higher feed prices will challenge all intensive livestock operations.”

WA Lot Feeders Association president Trevor Hinck agreed, saying consumers may bear some of the brunt of strong grain prices when supplies of grass-fed beef dwindled and grain-fed product started to replace it at retail in early 2018.

“Grain-fed beef producer margins are down by about 40 per cent compared to this time last year due to higher grain prices coupled with strong prices for store cattle in the saleyard,” he said.

“We are constrained in what increased costs we can pass on to consumers, but if processors have to pay more for our product in the new year, they might pass this on to retailers and supermarkets. The retailers would then need to decide whether to absorb that extra impost or increase their prices.”

Profarmer senior commodity analyst Angus Thornton said WA grain prices were at near-record levels and about $100 a tonne higher than global prices. This was in terms of the common benchmark wheat price in WA — the APW Basis for Kwinana zone — compared to Chicago Wheat Futures, which were also at five-year highs.

Mr Wilson, who runs 14,000 free-range hens, said as well as grappling with higher feed costs, the WA poultry industry was going through significant changes that required well-managed financing of new infrastructure.

“Egg producers are feeling further pressure with the drought effect, but it is expected consumers should be sympathetic in their food buying decisions,” he said.

Golden Egg Farms managing director Peter Bell said feed was the largest input cost for egg producers, with wheat making up 65 per cent of the laying hen’s diet.

“Egg prices will have to go up to keep the industry viable,” he said.

Mr Hinck, who runs Kerrigan Valley Beef in Hyden, estimated his on-farm grain price was about $100/tonne higher than last year and each animal on feed for 70-80 days would consume about 800kg to one tonne of grain.

“Our margins are determined by feed costs and the prices we pay at the saleyards, which we don’t want to see lose value as we want store cattle producers to stay in the industry,” he said.

“The options are for processors to pay us more and, to do that, they may pass on higher prices to retailers, which would then result in consumers paying more at the counter ... the full impact will be felt in about six to eight weeks when the market switches its reliance to grain-fed supplies.”

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