There’s a number of factors weighing on the poultry industry these days, but there’s also a bit of good news, as egg prices, in particular, soar to new levels helping to offset two years of tight margins.
“The egg market is feast or famine,” says Allison Brink, executive director of Michigan Allied Poultry Industries.
Beyond the continued threat of high path Avian Influenza, which left 52.5 million dead birds in its path as of November 28, soaring freight costs, higher feed costs, labor availability and even the dynamics of how farms will transition to future generations, temper the excitement.
“With commercial production being vertically integrated and marketing directly to customers like Walmart, Kroger, and Meijer, growers – particularly egg farmers – have to be innovative to stay in those markets, but there’s also going to be consolidation,” says Brink. “It’s difficult when a generation wants out; there’s a lot of tough decisions.”
Michigan has had 50% growth in the amount of laying hens since 1995. “I expect we will continue to be in a growth trajectory,” she says. Being a surplus state, Michigan eggs are going across the country.
Egg prices rose 10% just in the month of October. Meanwhile, chicken prices fell 1.3%. Seem counterintuitive? The bird flu in the U.S. has killed a large share of egg-laying birds but not as many raised for meat consumption.
High Pathogenuc Avian Flu
Avian flu, which is generally carried by wild birds such as ducks and geese, is highly contagious. It’s also extremely lethal; it kills 90% to 100% of chickens, often within 48 hours, according to the CDC. Once it is detected, the whole flock must be depopulated, according to a federal mandate.
Considering there have been 52,463,040 head of poultry depopulated in 46 states because of AI, Michigan has been relatively spared. The largest loss and the only commercial contamination of poultry was in May on a 35,100-head turkey operation in Muskegon County. There have also been 19 backyard producers ranging in size from 20 to 990 birds, for a total of 2,220.
In Wisconsin, the toll on the commercial turkey industry was much more severe. A total of eight operations tested positive and 355,300 birds were depopulated. The highest death toll was at a 2.75-million commercial egg-layer operation in Jefferson County, which was the first AI-positive farm in the state in March. The most recent to succumb to the disease was a 180,000 commercial upland gamebird operation in Jefferson County in early November.
Eighteen Wisconsin backyard flocks tested positive with 1,410 birds. Egg-laying flocks depopulated because of AI account for more than 10% of U.S. production. In Michigan, no commercial egg-laying facilities were impacted, to date, by the disease.
Retail prices are reflective, as consumers paid an average $3.42 for a dozen Grade A, large eggs in October — up from $1.82 a year earlier, according to federal data.
“Producers don’t like the idea of benefitting at the expense of other producers, but that’s what has happened with AI,” says Brandon Leep, vice president of agribusiness lending for GreenStone Farm Credit Services. “So now with the bird flu and a tighter supply, growers are experiencing a huge swing. At one point, they were getting over $3 a dozen versus 50 cents prior.”
A lot of egg producers are going to cost-plus contracts as freight, feed, and packaging material costs increase.
Chart Courtesy: USDA
Barn Conversions
In Michigan, egg-laying barns are slowly being converted to cage-free systems, per legislative mandate a few years back.
“Some are tearing down barns that have served their useful lives and replacing with new, while others are working to retrofit – many barns are under some kind of construction almost constantly,” Leep says. “It used to be you could build a new barn for $30 a bird, but now it is more than double that. In the last couple of years, it has gotten really expensive.”
Almost every egg farm in Michigan is in some phase of tear down and rebuild, with 75% of the transition now complete, according to Brink.
With chicken being the most consumed meat protein, Brink says there will be significant growth in the broiler industry in the near future. “Right now, Miller Amish Country Poultry is actively recruiting growers who will build broiler barns,” she adds.
Turkey perspective
High pathogen AI has contributed to high turkey wholesale prices. The disease remains a wildcard in poultry production, as it has held on longer than the 2014-2015 outbreak that subsided over the summer months. To date, there have been more than 8 million turkeys nationwide destroyed because of AI in commercial operations.
With corn and soybean meal being the primary ingredients in the turkey diet, the higher prices only partly benefitted growers, as record-high annual feed costs cut into margins. “These are the highest feed prices we’ve seen at least in a decade,” says Kyle Hurley, vice president of commercial lending for GreenStone Farm Credit Services. “But, if your operation didn't experience high path AI, then the opportunities are pretty good for profits, just not as good as they were in 2014-2015.”
Despite the higher prices for turkey, eggs and chicken, demand has not waned, he says. All agree it will be a profitable year for turkey, chicken and egg production, even with the higher feed prices. “Prices are probably the strongest we've seen,” Hurley says.
While biosecurity has always been a high priority in poultry operations, Hurley says farms are constantly looking for any opportunity to improve. “They are taking every effort to do so, which involves an increased use of disinfectants, reduced traffic through the barns and on the farm, as well as additional showering in and out of facilities,” Hurley says. “But really, there's just not a whole lot more they can do that they’re not already doing.”
Beyond disease, poultry growers – like many other ag industries – are facing labor issues. “It remains a challenge to staff the farms,” Hurley says.
In all, Leep says the next year looks bright for the poultry industry. Brink adds, “It is a testament to our farmers that they continue even though we've got all these challenges – some of them pretty significant. They continue to provide a steady, healthy stream of protein.”
