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Feed, fuel cost add to issues egg farmers face

POSTED April 19, 2011 10:13 p.m.
The Easter holiday usually brings a healthy boost to egg sales, but California egg farmers say soaring feed, fuel and other production costs are quickly eroding farm income, and legal uncertainties continue to cloud the future of their businesses.

Stanislaus County egg farmer Jill Benson, who is vice president of JS West in Modesto, said about 65 percent of the total cost of producing an egg is in feed and this year, she has seen a 35 percent rise in that cost. At the same time, she’s also earning about 14 cents less for a dozen eggs than she did a year ago.

That’s in spite of the fact that consumer demand for eggs has held steady, she said. And while the farm’s earnings are definitely lower this year, she noted that there is still a small margin for profit.

“It’s just not as generous as we normally would hope around Easter,” she said. “Usually, Easter is just a fantastic time for us.”

Egg sales tend to pick up two weeks before Easter, as supermarkets roll out promotions and shoppers stock up for their annual Easter egg hunts, said Debbie Murdock, executive director of the Pacific Egg and Poultry Association. But she noted that Easter is hardly the only time of year when eggs are in high demand. Thanksgiving and Christmas also bring surges in egg sales.

“More eggs are consumed during major holidays because people are baking and staying home,” she said.

But just as egg sales and prices go up every year around Easter, they come right back down after the holiday, said Richard Jenkins, owner and CEO of DenDulk Poultry Farms in San Joaquin County.

He farms conventional eggs and two types of specialty eggs—cage-free and organic. He said he saw sales of his conventional eggs drop 5 percent to 7 percent last fall and they never quite rebounded.

However, he noted that sales of his specialty eggs have gone up a bit—about 1 percent to 2 percent.

He added that while feed is a huge part of his production costs, skyrocketing fuel prices have also put a squeeze on another significant part of his operation, which also packs the eggs and delivers them to stores such as Safeway and Costco. He’s able to pass some of that cost on in the form of fuel surcharges, he said, but not on those customers whose contracts are already locked.

Arnie Riebli, a Sonoma County egg farmer who’s seen his feed costs go up by more than 50 percent and his eggs sell for about 20 cents per dozen less this year, said fluctuating production costs and commodity prices are nothing new to farmers, and everyone is trying to deal with that by tightening their belts.

But for California egg farmers, current market challenges are being compounded by another looming problem, he said—trying to comply with Proposition 2, which voters passed in November 2008 and takes effect in 2015.

The law mandates that specific farm animals, including egg-laying hens, cannot be confined in a way that prevents them from being able to turn around, lie down, stand up and fully extend their limbs.

Producers say language in the ballot measure is so vague that they do not know how to proceed with building new housing, which will require millions of dollars of investment, plus considerable time and logistics for the transition.

JS West filed a lawsuit in December against the state and the Humane Society of the United States, a main sponsor of Proposition 2, to seek clarification on what the law requires. The Association of California Egg Farmers, which represents 70 percent of the state’s egg farmers, has filed an application to join in the lawsuit.

“We’re not looking to overturn the law,” said John Segale, spokesman for the association. “We just want to have an understanding of what’s going to be required. Clarity is what we want.”

Last year, JS West upgraded one of its housing units with what’s known as enriched colony systems, which are widely used in Europe and provide hens with more space and other furnishings. The American Humane Association has certified the housing systems as a humane practice for housing laying hens.

Benson said the company has been marketing its eggs from the new housing systems under the “Comfort Coop Eggs” label but acknowledged that sales have been “less than overwhelming.”

At the retail level, Comfort Coop eggs are priced about 20 cents more than conventional eggs, she noted.

“After people voted in Prop. 2, their buying habits remained the same even though they had opportunity to buy cage-free, free-range, pasture eggs, organic eggs,” Benson said. “They’ve always had those choices, but those sales have remained fairly static.”

Riebli, who produces conventional and a variety of specialty eggs, said he has seen a small jump in his sales of specialty eggs, with the largest increase in organic eggs.

Having picked up some new customers for his organic and cage-free eggs, Jenkins said he plans to convert more of his operation to meet production requirements for the specialty products. But like most other egg producers in the state, he’s awaiting outcome of the JS West suit before he decides what housing system to build for the rest of his flocks.

“There’s really not much to do unless you have confirmation of what the proposition means,” said Steve Gemperle, a Turlock egg farmer.

Meanwhile, other states are encouraging California egg farmers to move and set up shop elsewhere, said Schue, who acknowledged he has “looked into different states.” But he said he is also waiting to see what happens with the lawsuit.

“I’d like to stay here, but that all depends on what we can and cannot do,” he said. “Until I know what that is and put a pencil to it, I can’t say whether or not I’m going to be in business or out of business in 2015.”

Jenkins said last year’s passage of Assembly Bill 1437, which requires out-of-state eggs sold in California to comply with Proposition 2, has given him hope.

“That has made me want to try to stay in business,” he said. “And we are trying to stay in business.”
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