Contract Farming Versus Supply Management

Part of the logic of contract farming, as I understand it, is providing more stability to the industry.

That might be questioned, given a 30 percent drop in egg prices.

Contract farming means the farmer in the hen house doesn't determine how many hens to raise.  She forgoes the possibility of good egg prices and hefty profits for hopefully a more certain profit (assuming disease can be avoided etc.).  The company doing the contracting makes the decision to increase or decrease production. Because the company only has to track what the other companies are doing, a much easier job than reading the minds of thousands of small growers, the company can make better decisions.

What happened to the theory?  Cage-free eggs seems to be the answer.  As producers increase production of cage-free eggs, both because of state regulations and the premium prices for such eggs, they misjudged the effect on demand for eggs from caged hens, and didn't decrease production enough.  The article doesn't say, but I'd guess the contracts the companies had with their growers limited their ability to cut production quickly.  After all the farmers have a capital investment in their hen houses and their cages which they planned to amortize over the lifetime of the buildings and equipment.

I don't know how possible it would be for a cage grower to convert to cage-free operation.  If the change is simply providing more cage space per hen, the conversion might be doable, although the grower would need to add building(s) to maintain the same level of production. Going to entirely cage free would be harder.  And free-range would be even harder.

Canada has a supply management program for poultry and dairy.  I assume that Canadians are as intrested in cage-free egss as Americans, so it will be interesting to see if their plan will work better in handling the changes than our markets do.

Farm Consolidation: First They Came for Poultry

In the 1940's our family farm was small, small dairy (12 cows), small poultry (1,000 hens), but with our garden we got by. I remember my mother fussing, she was a good fusser, about people from the city (a milk deliveryman, IIRC) buying a nearby farm and building a two-story henhouse.  This must have been during a peak in egg prices, possibly tied to a war, WWII or Korea. (This has a chart of inflation and deflation in egg prices since 1947.  Note how the prices vary from year to year.)  She'd gripe that people would see good prices and would jump into farming, expanding production (of eggs, in this case), resulting in overproduction and low prices.  This would hurt the established producers, like us, while proving the naivete of the city  folk.

My mother had German ancestry, so when she experienced schadenfreude when Hurricane Hazel in the 1950's came through and caused the collapse of that henhouse, she was doing what Germans do.  By then egg prices had dropped. Our neighbors never rebuilt.  After dad died, mom kept on with the hens into the 70's, but the infrastructure, the trucker, faded away.

I think poultry  was the first agricultural commodity where there was a turn from small farms to vertical integration through contract farming and large operations. The first, but not the last.  Dairy has followed, as have hogs.  Don't know about beef.  In field crops there's been a somewhat similar process of consolidation, though I think not with vertical contracts. Instead I think there's been a move to more sophisticated marketing, futures, etc.

What's the trigger for this post?  This dailyyonder piece discusses the impact of these trends in Iowa, including the observation that hog farms have decreased by 90 percent since 1977.

My title is from the mantra about the Jews from Martin Niemoller. He was saying to act early.  I'm pretty sure there was little or nothing anyone could have done to stop these trends. 

Chickens Need Space?

 A couple more stories on the "cage-free" movement for chickens:    Haspel in the Post
and today. 

Today's story treats the movement as a fait accompli for the Humane Society. As I've written before, I've some reservations about this.  There's tradeoffs: on the one hand chickens get space to behave more "naturally", on the other hand some of the chickens will lose their lives earlier than they would otherwise.  Being pecked to death is not a good way to die.  (Hens being omnivores react to the sight of blood and compete to get a beak full, and then another, and then another.

And the "free-range" concept also has qualifications: chickens are naturally a warm weather bird, so those being reared north of the Mason Dixon line won't go outside for all the months of the year.  Hen houses typically aren't climate controlled, perhaps fans to move the air during the summer but I doubt heaters.  I remember our hens huddling together for warmth on the cold days of the year, more hens in closer contact than if they were in cages.

I'm no expert in modern day poultry raising but I wonder about culling.  On the farm my mother would cull our flock of 1-year old hens down by half, keeping the best for another year.  But that's labor-intensive (requiring early morning rising and all-hands on deck).  I don't know whether these days hens are culled in the same way.  If they are, the process would be much easier and more accurate with the cages than not.

I honor the impulse behind the cage-free movement, but a sizable fraction of the benefits are accruing to people's sense of their own merit.

Eggs and Cannibals

NYTimes article on eggs, discussing the trend to cage=free eggs, specifically the replacement of cages by "aviaries".  I must admit I was shocked by the picture of the aviary in the article--while the hens could move freely, it was almost a solid mass of chickens on every flat surface.

For a human parallel, caged hens are like human prisons with no common areas/exercise yard. Hens in aviaries are living perpetually on a New York City sidewalk at the height of rush hour.

The article quotes a report:

Perhaps most troubling, “hen mortality was much higher in the aviary system,” the report said. When hens move around more freely, it is easier for them to spread germs. And hens in cage-free aviaries were also more aggressive than their cage-bound peers, pecking at one another and, in some instances, becoming cannibalistic.

The sight of chickens pecking a hen to death is not a pretty one, take it from experience.

Cage-Free Hens and Taco Bell

The Post reports Taco Bell has joined the cage-free egg grouping of fast food restaurants.  (Note, the math in the piece is flawed, as I take pleasure in pointing out to them in comments.)

It seems I've done a number of posts on cage-free eggs, but without a tag for it; you have to search the blog to find them.

Mom's on a Roll

First, earlier this year the government said that eggs were good for you, as my now-departed mother had always said.

Now they're in the process of saying that whole milk is also good for you, that the fat doesn't matter.

So the wisdom of my parents in running a dairy-poultry farm has now been vindicated; their products were and are good for you.

Dust in the Hen House

Extension has a post on poultry housing options.  From personal experience I can testify to the dusty conditions in a hen house (what they categorize as a barn).

Air quality is often poorer in alternative housing systems, and this can affect health and hygiene, which is relevant not only for hen welfare but also for food safety.
The large amount of litter and the greater bird movement in alternative systems result in greater concentrations of bacteria and fungi in the air and in greater dust concentrations compared with conventional and furnished cage systems. Greater dust concentrations have been associated with more serious pulmonary lesions, typical of chronic bronchitis, in cage-free birds (Michel and Huonnic, 2003).

As you might expect they've reservations about cage systems.  Whether or not they properly weigh the tradeoffs I won't judge, but there are tradeoffs.

Cage-Free Eggs and the End of the Nest Egg

McDonald's made news by promising to move to cage-free eggs within 10 years.

I did a Google image search and I'm damned if I can see any eggs or nests, just a bunch of happy hens.   But I want to know--where are the eggs?

In my youth we started the chicks in brooder houses, gradually allowing them to free range. When the pullets started laying they'd usually lay in the corners of the brooder houses, but not always.  They seemed to follow the leader--sometimes you'd find a nest along the fence row where some had laid several eggs.

Once we cleared the old hens out, and cleaned the hen house, we'd move the best pullets into the house.  There they had a bank of nests--3 or 4 rows high, with a walkway behind the nest.  The front was hinged, so you could easily access the nest.  The nest itself would have a "nestegg", meant to signal to the hen that this is where to lay the egg.  It usually worked--very occasionally a hen would lay an egg in a corner of the area.

Found this Youtube video, from a manufacturer of colony cages, approved by the EU.

It appears from the last link that the hens lay their eggs on the wire bottom of the cage, periodically a bar riding on top of the wire moves the eggs to a collection conveyor belt at the front of the cage, and the conveyor belt conveys the eggs to the processing area.  Apparently nesteggs aren't essential.

I wonder--the pictures I've seen have been brown eggs. Brown eggs are prettier than white, though the nutrition is about equal. So are the pictures just showing pretty eggs, or have white Leghorn hens, the breed we raised, become unpopular?

Egg Prices--Back to the Good Old Days

I mentioned this back in April, when I was amused by the euphemism--"depopulation" used to cover killing the infected poultry.

Now the bird flu epidemic has resulted in killing so many birds that there's an "egg crisis".

As is usual these days this reminds me of my youth.  In the 1950's we just beginning the process of switching from small growers to contract growers.  The reason for the change was economics. There were two cyclical processes at work: supply/demand and feed prices.

  Small growers like my parents had no pricing power, meaning that egg prices yo-yoed up and down.  If feed prices were down, you could make money.  But if you were making money you'd increase your flock and your neighbor would blow the dust off her brooder stoves and order some chicks.  The result would be overproduction, and prices would drop.  Meanwhile the prices of feed (corn, wheat, oats) would have their own fluctuations.

My mother would get very indignant at this, blaming the people who weren't true chicken farmers but who simply jumped on the bandwagon of higher egg prices.

The solution, obvious in retrospect, was for consolidation to give big egg producers some pricing power, and the ability to adjust production in line with market conditions.  That meant going to contract farming, where the farmer has the chicken house and associated equipment, and simply contracts with the big outfit to produce x number of eggs from y number of hens. (It's similar to the process for growing chickens for meat.)  This reduced price risk meaning egg prices have been more stable.

Unfortunately, the logic of contract farming meant replacing small flocks with large flocks, taking advantage of labor-saving equipment (I've no fond memories of gathering eggs from under possessive hens who'd bite my hand and twist.)  In effect it's like moving air travel from lots of single engine planes to 747's, meaning safer air travel and fewer accidents, but when there is an accident, it's big.  That's where we are now.

Today's Euphemism: Depopulation

"Handling a depopulation and disinfection on a layer site is more complex than a turkey site..."

from an agriculture.com post on the bird flu problem in Iowa.  (I wonder what position the candidates for President will take on it?)
 
Didn't know birds got flu?  They do, and they're likely the original source of human flu type A, the most common kind.  

Flu is a big problem for poultry producers because there's not much to do except kill the birds, and invent an euphemism for it.

The Price of Eggs (Volatility, Integration, and Tuition)

Yglesias at Vox posts on the recent price of eggs.

What's interesting is the volatility; over the course of a year (2008) it looks as if the price increased about a dollar, or maybe by 80 percent.  Now I can remember the price of eggs bouncing around in my youth.  IIRC they maybe went from 30 cents to 70 cents and back down (and up and down and up and down).  This was at the end of the era of small flocks, right as the industry started to be vertically integrated, with companies contracting with farmers.  I had always thought the purpose was to gain market power, by reducing the egg suppliers to a handful of companies they could collaborate to adjust supply and thereby keep prices relatively steady.  Now the graph only covers the last 10 years and shows a steady rise in prices but not much volatility except for the one year, so I'm not sure whether my understanding of the economics is wrong, or whether 2008 was an outlier. 

A side note: if the change in the price of eggs from 1954 to 2014 had tracked the price of tuition and fees at the college I attended, the price would be close to $100 now.

The Market and Humane Treatment of Hens

Dirk Beauregarde reports on the effects of the new EU regulations banning battery cages: egg prices have soared, and prices for pastry and French bread have increased.  The story is marred, however, by the horrible puns.

Cage Hens

US egg producers and the Humane Society are proposing a deal: if Congress will pass national standards, they can live with 144 square inches per hen, instead of 67. See this post on the Rural Blog.

The deal represents the sort of interest group bargaining we often see: in essence the big guys are working against the little guys.

[Note: I'm using Blogger's new editor, which I'm not sure I like--change is bad.   I keep forgetting labels before I post.]

Regulating Eggs

Post has an article on the complexities of regulating eggs for salmonella.  Two bits illustrate the complexities:

[In the 1980's]For egg farmers, however, the problem was not so easily dismissed. Faced with bad publicity and multimillion-dollar liability claims, they voluntarily began testing for the bacteria, disinfecting henhouses, refrigerating eggs, removing manure and controlling rodents. But those farmers soon came to think that they were at an economic disadvantage against competitors who weren't spending money on prevention....

The fact that the egg industry was on board [with draft regulations] didn't sway Dudley [GWB's person for regulations in OMB]. "One needs to be skeptical when an industry seeks regulation, because it often confers competitive advantage. It could be over other companies or over international firms," she said. "And it often raises costs and it's consumers who get hurt."

 Basic fairness says everyone in a market should be competing on an equal basis.  The government should set the rules and let the competitors fight it out. Of course, that raises the issue of  who is in the market?  Should someone with a thousand hens be considered a competitor the same as someone with a million hens? How about the person with 20 hens who supplies neighbors?  I think that's basically what Dudley gets at when she speaks of "an industry". She's really talking about the big boys in an area who have the bucks to come to DC and hire lobbyists, etc. The economics of regulation sometimes, not always, create additional costs; costs which if you're big can be spread over many units of production but if you're small can be make or break.  (I'm thinking of shifting from milk cans to a bulk tank, which was a hot issue for dairies when I was 20 or so.)

So the tradeoff can be: draw the line in one place and you allow free-riders; draw the line in another place and you encourage concentration and kill the small producers.

Eggs and Cage -Free Hens and Dirt

The Washington Post runs an article  on caged and cage-free hens, tied in with the salmonella problem. It's accompanied by a photo, which I don't see on the website, showing hens in a row of nests. The photo called up memories, and thoughts.  (Here's a link to a similar photo, found through Google Images.)  The article said currently cage-free eggs are about twice the cost of cage eggs, and even with mass production the cost differential would still be 25 percent more.

Some points for anyone who didn't have a close association with hens growing up:

• cages permit total control over the hen.  You can use conveyor belts to bring grain to the hen, pipe in water to the waterer, and allow the eggs to roll into another conveyor belt.  The manure drops through the cage bottom  Presto: eggs untouched by human hands.
• cage-free hens who lay eggs in nests, as in the picture, are an entirely different matter. Someone has to collect the eggs from the nests.  Because eggs are laid throughout the day, although more heavily in the early hours of the day, the eggs need to be collected multiple times a day.  Why not just once?  Because eggs are fragile; the more eggs you have in a nest the more likely the next egg laid is going to drop on an egg already in the nest and one or both eggs get cracked.  That's bad for several reasons: you've lost one or two eggs; if the break is bad enough the white of the egg gets out and spreads over any other uncracked eggs in the nest, you've now got dirty eggs which are hard to clean; finally, if a hen tries pecking at the white/egg and finds it good, which they do, you're training a hen to peck at eggs to get the contents.
• even if you collect the eggs often enough to avoid breakage, you face another problem not found in cages: manure.  Hens are not naturally fastidious and will defecate in their nests.  That means some percentage of the eggs collected have manure clinging to them, sometimes really staining the shell.  So after the eggs are collected you need to clean the eggs.  Growing up cleaning eggs was my mother's job, which she did manually.  Could take 90 minutes or so to do 900 eggs.  If she was sick, we could use an early egg cleaning machine, which was faster than I or my father.

So the bottom line is cage free eggs require a lot more labor than eggs from caged hens. I'd assume these days there are innovations which we didn't have 60 years ago, but I think the labor accounts for the difference.

One final note: if you look at the photo, you'll see someone who is collecting eggs will have to lift the hens in the nest to see if they're sitting on eggs already laid.  Now hens vary in their personality; some are timid, some aggressive in protecting the eggs, and some are from hell.  The latter ones will grab a fold of skin on the back of your hand in their beak and pull and twist.  Not a nice feeling.  I still feel the anger from 60 years ago. 

Hens and Cages

From Farm Policy

Rod Smith reported yesterday at Feedstuffs Online that, “American consumers buy eggs from cage housing systems by a margin of more than 40 to one over eggs from cage-free systems, according to data from Information Resources Inc. (IRI), which tracks checkout scanner transactions from 34,000 grocery and other retail stores in the U.S.
“Furthermore, based on other research, Americans pay three times less for eggs than Europeans do. Also, more than half of Americans prefer that egg producers continue to use current cage housing or migrate to alternative systems such as aviary or colony cages, and 44% prefer cage-free housing.

I wonder how it came to be that Americans pay three times less for eggs? Is the European poultry industry less concentrated?  Is it not vertically integrated as ours is? Do we just profit by the bigger market?  Do Europeans prefer more what in wine they call "terroir", which are the mostly imaginary qualities which are supposedly associated with production in a specific area.

[Updated--decided to do a little Googling and found this about the French industry.:]

National egg consumption over the last three to four years is estimated at 248 eggs per person on average, compared with 251 a decade ago.
Of these 248 eggs, 172 (69%) are believed to be table eggs, while the remaining 76 (31%) are thought to be processed eggs. Household purchases represent 40% of total consumption, followed by yolk and albumen (31%) for the food industry, table eggs for the catering sector (20%), and poultry farmers’ personal consumption (9%). Supermarket sales amount to nearly 4 billion eggs, or around one third of total consumption. Organic, Label Rouge and free-range eggs account for 28% of eggs sold and 42% of supermarkets’ turnover from egg sales. [I suspect here's a big difference.] France remains one of the EU’s biggest egg consumers.
The French egg market is at a crossroads in a fast-changing regulatory, economic and sanitary environment. While production and consumption perspectives remain favourable at international level, growth is slower in France and the rest of Europe, with a slight decline in production over the last few years.
The sector’s outlook depends on the development of EU-wide regulations concerning animal welfare, human health and the environment. The forthcoming ban on conventional cages, which is due to come into force on 1st January 2012, is expected to result in the further diversification of rearing systems and the development of alternative rearing methods, the ITAVI forecasts. In addition, growing awareness among consumers of animal welfare, as well as health and environmental issues, is likely to shape the market and benefit the organic sector.
The French poultry industry faces the tough challenge of adapting its production structures and making strategic investment choices over the next 20 years. However, the heavy costs involved may result in the disappearance of a number of small poultry farms, says ITAVI deputy manager Jean Champagne. Future production methods will have to guarantee human health and animal welfare as well as offer competitive prices, all the more so as the EU market is likely to be opened to imports from third countries that are not subject to the same requirements.

Only Animal Farmers Are Real Farmers

That's a bold claim, sure to tick off all the grain and fiber producers, but read this post from the Life of a Farm blog and you may understand. As he says: " Thing is the chickens don’t take days off."

(He's under contract to raise layers and finding it more work and more tedious than he anticipated. He also complains about the lack of help, neighbors who cheat SSI, and the possible need for immigrant labor.)

As I say, a dairy or poultry farmer is the only real farmer, because animals will drive you to drink. You may work 18 hours a day planting or harvesting grain, but it's not every day. You can get away. Caring for dairy cows or poultry is a job 365 days in a year, with no breaks, no vacation, always chained to the schedule of feeding and watering, milking and collecting eggs. If any farmer writes about traveling or camping, be assured they're either not a real farmer by my lights or they have some gullible relatives.

Poultry in France Is Regulated

I may have mentioned we had hens when I was growing up. I hated the brutes--their nips when you tried to take their eggs could hurt. That's probably why I've not written about poultry on this blog. But this bit in the Beauregard blog caught my eye (he's a Brit living in France teaching English) (he didn't bake something for his daughter to take to the convent for her pre-communion day of mediation):

Now, I have already written at length on the French and their skills as homebakers. This country might be the global gastronomic powerhouse, but French mums just can’t bake. Your bog standard cake stall at an British garden fete, beats the French effort hands down. This is also the country of strict hygiene controls. At a French school fete, you are allowed to bring along a cake bought in a supermarket, but woebetide you if you take along a home made effort, even if it is out of a packet. It’s all to do with the eggs. Powdered egg only. Anything made with real eggs is banned from the spheres of the school cake stall. This also explains why it is so difficult to get a plate of egg and chips in France. In all food outlets, only powdered egg is allowed. Which is why you can’t get an Egg MacMuffin in France.

I assume they've had problems with salmonella?