Bakers are facing further increases in egg prices, and possible shortages, as demand escalates in the run-up to Christmas.

Egg prices increased dramatically this year after the implementation of the EU’s Welfare of Laying Hens Directive, which banned the use of battery cages.

Producers in many EU countries, including France, Spain, Belgium, Italy and the Netherlands, have still not met the requirements for more spacious ‘enriched’ cages, which has led to a tightening of supply. At the same time, poor grain harvests in the US and Russia have forced up feed prices.

Terry Jones, director of communications at the Food and Drink Federation, said: “There is a great deal of uncertainty in the market at present and, as we approach the peak Christmas production period, supplies of eggs and processed egg products are expected to tighten further and prices escalate. While companies are increasingly forward-buying on eggs, as we saw earlier this year, this provides limited security if processors are unable to deliver contracted volumes.”

Jones added that it was difficult to make accurate forecasts of future egg prices due to a lack of information on how many birds are still housed in non-compliant cages across the EU and when they need to be taken out of production. “We strongly believe that the current situation would be improved by better transparency from the European Commission on the supply of eggs,” he said.

“This would help to inform of any need for additional imports as the industry seeks to avoid a repeat of supply shortages which led to the closure of production lines earlier this year. It’s also clear that current restrictions on egg imports from outside the EU, such as from the USA, are further hindering businesses. We are currently in discussions with Defra as to what role they can play in overcoming this and what needs to be done to ensure that UK production continues without interruption.”

According to Defra statistics, intensively reared egg prices increased by 50% between August 2011 and August 2012 from 52p per dozen to 74p, while free-range eggs increased by 21%.

More recently, research company Mintec says that UK and EU egg prices have fallen due to increases in the EU laying flock, which has boosted supplies, but prices are likely to come under further pressure next year due to high feed costs.

“Global shortfalls are expected to raise demand for EU feed exports, which could also act to raise EU feed prices and may also limit the availability of EU feed,” said Mintec in its August Chicken and Eggs market report.

Ingredients company Arla Foods said many cake and pastry manufacturers have switched to using egg replacers, such as its whey-based ingredient Nutrilac, as egg prices have soared.