Author: Dennis Brothers

Highly Pathogenic Avian Influenza (HPAI) is once again rearing its ugly head across the poultry industry. This year’s bird flu outbreak has taken millions of birds from the commercial broiler industry, egg industry, and turkey industry. According to USDA numbers as of March 21, 2022, a grand total of 11,901,888 commercial birds have been destroyed from control efforts in confirmed cases of highly pathogenic avian influenza (https://www.aphis.usda.gov/aphis/ourfocus/animalhealth/animal-disease-information/avian/avian-influenza/hpai-2022/2022-hpai-commercial-backyard-flocks the current count at the time of this printing may be higher). This number is sobering but is thankfully still much less than the over 50 million chickens and turkeys destroyed during the 2014-2015 outbreak.  Considering the Delmarva area as part of the southeastern poultry region, 3.59 million birds have been lost to HPAI thus far in the southeast alone. 32% of these, or 1.1 million, have been broiler type birds.

Table 1: Total Bird Losses due to HPAI for Southeastern Poultry Industry (as of 3/21/22)

	Delaware	Maryland	Missouri	Kentucky	Total
Broilers	421,800	150,000	360,000	231,398	2,310,135
Layers	1,146,937	1,160,333			1,160,333
Turkeys			62,785	53,286	116,071
Total	1,568,737	1,310,333	422,785	284,684	3,586,539

Focusing on Broiler Impacts

Since the southeastern poultry region is considered the “broiler belt”, and the highest percentage of losses in that region has been broilers, let’s focus on that impact. How do these losses compare to the total inventory of broiler type birds in this region? If you take the recent 2020 USDA inventory data (which excludes LA) and estimate a 2% inventory increase over the last two years, the southeastern region currently has approximately 9 billion live broilers in inventory. Losing 1.1 million broilers equates to losing 0.013% of the total inventory of the region – which doesn’t sound like much when you put it in those terms. Estimated total dollar value lost is a little more impactful number. Using an average live weight of 6.4# per broiler with a 75% dressing percentage and current combined southern states average traded value of $0.64 per pound of chicken, the lost broilers represent a total dollar value of $3,573,344 in lost revenue to the industry. According to a recent report from the National Chicken Council’s (https://www.nationalchickencouncil.org/wp-content/uploads/2022/03/Live-Chicken-Production-FARMECON-LLC-2022-revision-FINAL.pdf), the current average contract broiler pay rate across companies was estimated at $0.0676 / pound of live bird delivered to the plant. Using this rate, $503,246, or roughly 7% of the total industry value, would have gone to the contract broiler growers raising these birds. For these individual commercial poultry growers, the loss of a flock could represent up to 25% of their annual revenue and could be truly devastating to their operations.

Is There Relief in Sight?

The U.S. Department of Agriculture and state level agencies have the responsibility of protecting the nation’s agricultural industry population from disease outbreaks. Everyone involved in commercial poultry is focusing on tight biosecurity to avoid the HPAI losses seen in 2014-2015. Unfortunately, HPAI infection means mass depopulations. Fortunately, the Animal Health Protection Act authorizes USDA to provide indemnity payments to producers for birds and eggs lost due to HPAI, including costs of actual depopulation and mortality disposal. While these payments may not completely cover all losses, and this program does not cover losses incurred through additional out-times or other future business interruptions, they can go a long way to securing the future of the farm in the face of these catastrophic situations. Poultry growers can go to https://www.aphis.usda.gov/publications/animal_health/2016/hpai-indemnity.pdf for additional HPAI indemnity program information.

Brothers, Dennis. “The Cost of Avian Influenza to the Southeastern Broiler Industry“. Southern Ag Today 2(14.2). March 29, 2022. Permalink

While poultry remains the least expensive animal protein, prices are at a sustained multi-year high. Prices normally fluctuate in somewhat of a seasonal fashion, as seen in the 3-year average line above. COVID caused an extreme disruption to the downward side in Q2 2020. Then 2021 changed everything again. Early spring brought the market back to somewhat normalcy as dining away from home regained popularity. Then the highly touted “chicken sandwich wars” heated up as restaurant chains pushed for ways to get customers back through the doors. These and other improving market conditions began to drive prices up in early Q2 ‘21. At the same time, company processing plants struggled with employee absenteeism. Combined with sustained transportation issues and other supply chain weaknesses from the last year, the supply of chicken was unable to keep up with the new soaring demand. The result is sustained high and rising 2021 prices (brown line in chart). 

Monthly Composite Broiler Price, Weighted Average $/cwt

What will 2022 bring? As poultry companies try to expand live operations to meet demand and keep plants operating at full capacity, they are meeting difficulties on both fronts. Despite increasing plant wages, many are still reporting sustained 20%+ absentee rates for many shifts. Then along came increasing prices for building materials and labor. Contract growers who raise the chickens are finding it almost impossible to afford to build the new housing integrators need to supply more birds to the market. To secure new housing, integrators are having to invest more into the farms, increasing live production costs. It is suspected that these factors along with continued supply chain struggles will ultimately influence prices to stay high in 2022, and possibly beyond. 

Brothers, Dennis. “Poultry’s Perfect Storm in 2021-22“. Southern Ag Today 2(4.2). January 18, 2022. Permalink

Poultry growers across the southeastern broiler belt are watching heating fuel prices closely. Most commercial poultry houses are heated with either liquid propane (LP) and natural gas (NG) and heating costs can account for upwards of 40% of the annual cost of production.  Currently, commodity trading prices of LP and NG are at 5-year highs. The reasons for this are multi-faceted but are closely related to a national supply deficit approaching 30 million barrels of LP per the latest U.S. Energy Information Center’s inventory update. Additionally, the NG crisis in Europe and Asia created a driver for prices to move higher as traders buy BTUs across the energy spectrum. Since LP is primarily a byproduct of crude oil & NG production, recent disruptions in offshore oil and the overall decrease in domestic oil production has shortened LP supply. Natural gas price has moved up 2.5x in the past year. This has a major impact on propane prices as natural gas acts as a price floor for propane. These factors, along with higher trucking costs, are indicators that LP prices could continue to rise this winter and reach all-time highs in the short-term.  The bottom line for poultry growers is to do all they can now to prepare for significantly higher heating fuel costs this winter. This includes considering available price security options sooner rather than later and doing all the tightening up and insulating of their houses they can manage. It could be a long winter. 

Brothers, Dennis. “Commercial Poultry Input Costs Heating Up!” Southern Ag Today 1(43.2). October 19, 2021. Permalink