High Feed Costs Have Hit US Broiler Growers

US - Poultry farmer in Georgia say that feed costs have been making bigger dents in their incomes, and that the poultry companies have been delaying payment to their growers. A spokesman for Pilgrim's Pride comments that corn prices are now falling.
calendar icon 25 June 2009
clock icon 5 minute read

Jada Wessinger has been raising poultry in Bowdon for nearly two years for Pilgrim’s Pride Corp. She loves the work, but it's been tough.

"We're struggling," she told Georgian Times. "I’m here to tell you, we're struggling."

Ms Wessinger entered the poultry industry just as feed prices started their upward march. For the last two years, feed prices have been on the rise and that was one of the factors cited by Pilgrim's Pride that helped push it into Chapter 11 bankruptcy in December.

The company provides feed for the growers it hires to raise its chickens. In its third quarter 2008 financial report, feed was listed as 42.4 per cent of the sale price of its product, up from 39.5 per cent in the second quarter of the same year. Feed costs were up $266 million from the same period the year before. The price the company was getting for its chicken was not keeping up with the cost of production, forcing the company to cut back, and that hurt the farmers. The company is sending them fewer chickens to raise.

"It does affect your pay," said Vanessa Thomas, who with her husband Gary have been raising poultry for Pilgrim's Pride since 1986. "You get batches of chickens in. We usually get like seven batches a year. So, that would be like seven paychecks a year and now you're only getting like six."

For the last 18 months, the company has been waiting a couple extra weeks after picking up the grown chickens to send a new batch to the growers. Where the growers used to receive new chickens within seven to 10 days, now they're waiting more than three weeks. During that time their poultry houses sit idle and the farmers aren’t making any money. And Ms Wessinger has been receiving fewer chickens in her batches.

That means the farmers have sometimes had to subsidise their growing costs with household money.

"You spend $35,000, $40,000 a year in gas just through the wintertime, and you don't get a gas check," Ms Wessinger said. "My husband still works a full-time job, and there are times he has to pay chicken bills with his check."

But things seem to be getting a little better over the past couple of months, they said. The wait between batches is a little shorter and the number of chickens in the batches is moving back up.

The feed prices have been falling, giving Pilgrim's Pride a little more breathing room. It hopes to emerge from bankruptcy by the end of the year, Director of Corporate Communications, Ray Atkinson, said.

"The monthly average price for corn futures for June 2009 so far is $4.23/bushel," Mr Atkinson wrote to Georgian Times by e-mail. "One year ago, the monthly average for June was $6.99. The June 2007 average was $3.81 and June 2006 was $2.38. So prices have come down considerably since this time last year, which will benefit the company versus this time last year. But prices are still somewhat higher than they were in 2007."

Following grain prices can be a roller coaster ride, said Sharon Notch, manager of Wallace Farm and Pet Supply in Bowdon Junction.

"They fluctuate, just insanely," Ms Notch said. "Nobody can keep up."

Prices were up last year at this time – a 50-pound bag of whole corn was selling for $10.50 and Purina poultry feed was selling for $14.25. Right now, they're down a little to $8.50 and $13.50, respectively, but that is up from just two weeks ago. That's just the way it goes, Ms Notch said.

There are ways for independent farmers to cut back.

"People have cut back," Ms Notch told Georgian Times. "They would switch off to maybe a cheaper brand, which we have, or they would just switch off to a cracked corn or the scratch. There are ways that they can cut costs but at the same time they cut quality of the eggs, quality of the yolk."

For large-scale operations that want to grow chickens quickly and maintain quality of eggs for sale, that may not be an option.

Ms Wessinger and Ms Thomas may not be making as much money as they have in the past but both of them say they are in it for the long haul. They are hoping the economy will improve soon, and so will their profits.

"We will continue," Ms Wessinger said. "We love it here, love it. Oh, yes, even if it costs, we love this place."

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