Calculating Egg Prices

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More Egg Math

Someone brought this to my attention. It’s from a Facebook posting for a farm in Oregon. No names are required. I’m not “telling them off”, just utilizing their example.

Every two months we order a one ton tote of verified GMO free, organic and locally produced chicken feed. It is the most expensive and high quality feed in our area. We believe this feed as a supplement to fresh pasture and organic veggies produces the best eggs possible for our members. Every year we spend about $6,000 on chicken feed. We sell all of our eggs which totals to 850 dozens and we sell them for $6.50 per dozen. That means this year we will lose about $800 on our eggs. So the question becomes, do we raise our prices? or do we buy poorer quality feed resulting in poorer quality eggs? This is a question that the farmer faces everyday but the consumer is the one to answers it.

The detail that they buy “the most expensive and high quality feed in our area” amuses me. You have to pay the most to get the best? Really? Are you sure you are getting the best or are you just paying the most and making an assumption? And I really have a lot to say about “verified” GMO-free feed and the quality of protein available in substitutes. Anyway.

Let’s start with his egg production numbers. He says he gets 850 dozen eggs/year and loses about $800 on eggs (If you do the math he loses $475 on feed but let’s just run with his numbers).  That’s 2.3 dozen/day. Let’s say they raise their prices to $12/dozen ($1 per egg!). That brings egg revenue up from $5,525 to $10,200…which is a good thing because his calculation above doesn’t count land usage, fencing, housing, labor, etc.

But let’s look at his numbers again.

He’s buying in bulk, getting a one ton tote – 2000 pounds, same as 40 bags – for, apparently $1,000. That’s $25 per bag of feed. High but not entirely out of the question. We pay significantly less but we live where the corn and beans are grown and our customers aren’t demanding non-GMO organic. They’re delighted with fresh, orange-yolked eggs that taste good and come from healthy birds out on healthy pasture. But I digress.

The farmer in question gets 10,200 (850 * 12) eggs each year…or around 27 eggs/day. Let’s say they get 30 eggs and throw away 3 that are checked, cracked, stained or misshapen. A chicken lays 2 eggs every three days. Really good ones lay an egg every 28 hours. Let’s pretend there is no winter. To get 30 eggs you would need (30/.66) 45 birds…as two thirds of the birds are laying each day…right? He’s feeding 2,000 pounds of feed every two months, or 33 pounds of feed every day or 22 pounds of food per chicken per month. My birds don’t eat that much but maybe my chickens are freaks so I did a quick search of the internets and I found that a laying hen (probably in confinement) should eat 10 pounds of feed every month and they tend not to overeat. He’s going through more than twice that amount of feed. So I guess they have at least twice that number of birds and they aren’t laying well…which could either be an indication of bad genetics, age or maybe his high-quality feed isn’t high-quality enough.

Now, I’m skeptical of the 10 pound figure. First because it comes from Nutrena. They don’t use whole grains…it’s like giving your chickens snickers bars. But the article suggests correctly that free-range birds can harvest some portion of feed for themselves…at least, for a portion of the year. We feel that we need to feed our chickens whole grains (even if shattered) rather than processed remainders. We also take our mineralization and pro-biotics seriously. If the chicken itself has unhealthy gut flora she can’t digest and absorb her food efficiently (and we feel this applies to ourselves as well). I don’t want those minerals to just slip right through the bird. With that in mind, with very little searching, I found this quote from a Backyard Chickens member:

I have 61 in my free ranging flock and I go through 200 lbs of feed a month.

UPDATE:
As Craig pointed out in the comments below, that figure is pretty extreme. In fact, it is almost as extreme as 20 pounds of feed per chicken. I apologize. Craig’s numbers, my numbers and several others I have spoken to are more in the 7 pounds/bird range when on pasture. If you are unhappy with my calculations for the number of chickens involved, calculate the pounds of feed per egg. I think that may better illustrate the lack of efficiency the farmer in this example is ignoring.

I don’t know what the revenue picture is for the farm (though Facebook indicates they are building a big new barn) but it looks to me like they could save a little money and, probably, a lot of time if they would stop raising chickens for eggs…or, at least, abandon the chickens they are currently raising. Rather than transport 3 pounds of feed to Oregon maybe he should transport 1 pound of eggs and spend additional time planting, weeding and marketing produce. Do 2 dozen eggs/day really bring in enough customers to justify paying them to take the eggs? As you know, I’m dealing with similar issues here.

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Eggs: Cheaper By the Dozen (Updated)

So, how do we make money on the farm? Well, we really don’t make much but opportunities abound. Today I’m going to talk about eggs and my answer is decidedly nonlinear. Further, the numbers I use may not apply to you at all but the process involved will at least provide you with the base questions to ask to determine profitability. Remember, price is determined by customers. It’s harder to find customers for $10 eggs than for $1 eggs. It’s hard to find chickens that lay eggs you can sell for $1/dozen. We currently sell $4 eggs. The money we make helps us move the farm forward, even if slowly. I’m happy to offer this transparency to our customers and readers. You should know what you are buying…what you are supporting…and what you are getting into. I have to make money to continue farming. If you think I’m making too much money (lol!) you can pursue other options.

I always enjoy talking to new customers after they have tried their first dozen eggs. Quite often they go on and on about taste, texture and color. Based on customer feedback and my own experience, we make the best egg in the world. However, no matter how good our eggs are, I won’t stay in business if I don’t count the cost. We have to figure out what it costs to sell eggs. Again, I won’t work for free. I need to make good use of my time. If eggs aren’t worth doing, we’ll make soup. This was originally posted on The Survival Podcast Forum but I have revised the numbers slightly.

Here’s what my numbers look like with additional detail below. Keep in mind we’re small potatoes so economy of scale works against us. Also realize I have been known to make errors in my math.
Costs (per day):
Chicks – $0.005
Feed – $6.72
Fencing: $0.27
Housing – $0.34
Egg handling – $1.89
Those costs total $9.265/day or $0.154/sellable egg (60 eggs/day annual average)…$1.85 per dozen before labor. I usually just say $2.

We retail eggs for $4/dozen and seasonally wholesale a portion of our eggs so we’re really looking at a gross of $19.50 and a net of $10.25/day, again, before labor. Labor includes moving chicken houses, feeding, watering, collecting the eggs then cleaning and sorting the eggs. This is unskilled labor and is valued on the market at less than $8/hour. (Probably much less than $8/hour.) That means I have to make darned I wrap up my work quickly or the farm is losing money.
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Now the boring details. My feed is not organic. It is not non-GMO (Sorry for the double negative). I use the Fertrell poultry rations and grind my own.

Last year’s pullets cost me an average of $1.80 each. I bought 350 then sold 225 of them for $5 each at 8 weeks…basically covering the costs of all birds up to 8 weeks. This covers electricity, water, brooders, shipping and feed. So I’m starting at 2 months from zero. 3 months to go before the first egg.

I raised my pullets on the alfalfa field. The cost per day of using the alfalfa field is a wash against the benefit of the manure they put down and the minerals from their feed. I feed them broiler mash until 2 weeks before onset of lay. Last year broiler mash cost me $26.92/hundred to grind myself. 125 birds ate an average of 15# of feed per day for that period of time so we’re looking at $4/day to feed 125 birds until their first egg. Again, the bird was free for the first two months. I have 75 days of feeding at $4/day spread across 125 birds in the flock. Let’s say 120 birds in the flock because at some point last spring a raccoon ate 5 of them. (Dad and I took turns sitting out all night every night for a week and never saw him.) So, at point of lay, each bird cost me $2.46. That has to be recuperated over the remaining 18 months of productive chicken life…or an additional half cent per day.

As adults, the birds get a slightly different ration that costs $27.14/hundred for me to grind. During the winter they tend to eat more than summer but the flock averages 20 pounds of mash and 5-7 pounds of oats each day. Oats cost me $20/hundred so let’s say $1.20 worth of oats each day and $5.42 of layer mash totaling $6.62/day for chicken feed plus $0.10 per day for the range feeder (assuming it lasts 10 years). We get 80-90 eggs/day from those same now 110 birds (predation is an issue) and to make the math easier, I’ll suggest to you we get a yearly average 60 eggs/day that are grade AA Large. The balance are cracked, stained, misshapen or small. 5 dozen eggs are salable. With me so far?

The birds spend their lives (2 years) surrounded by four lengths of PermaNet. That’s a $660 investment plus a solar energizer that cost $350. The fencing and charger, spread over 10 years, divided out to a per-day cost takes us to $0.27 cents/day.

The birds live in two simple hoop structures that also should last 10 years. Each hoop costs $200 to build plus two nest boxes for $180 each, again spread over 10 years adds another $0.21 per day. If we winter in a high tunnel the cost of the tunnel is spread between the livestock we keep there and the produce we grow the rest of the year. Since we bought the tunnel used the cost per day is pretty low. If we apply the entire cost directly to the chickens we need to add $0.13 to the cost every day.

I pay $0.31 for unprinted paper egg cartons. I sell 5 dozen eggs/day so that’s $1.86/day. We collect our eggs in baskets or plastic egg trays daily. For sake of completion I’ll add those in at $0.03 per day.

Now, labor. For months we moved our pullets every day, never getting a dime (beyond manure value which we washed against alfalfa field usage). Now, every day we move the layer houses (1 minute each), feed, water and gather eggs (15 minute round trip from the house). Then we wash, grade, sort and pack eggs (1 minute/dozen). 23 minutes of time against $10.25. Really the margin isn’t very good but that’s why it is not a primary enterprise. Salatin says a layer should make you $12 over the course of her life. I’d say that’s about right. But having eggs to sell puts our label in a family’s kitchen every day of the week. Once we get our eggs in the kitchen we go ahead and sell a chicken. Then half a hog. Each of these operations is increasingly profitable.

You can see from that, once you calculate the value of your time, eggs are a hard way to make a living. Without paying a dime for labor we are in the neighborhood of $3,000 from egg sales this year and we only worked for 23 minutes each day…not counting time spent sourcing and grinding feed, checking water extra times on hot days, sleeping in the pasture to deal with whatever has been hunting my birds or just marketing product. My true labor average may be more like an hour per day. Also, the layers don’t lay steadily year round. At some point production will drop below 3 doz/day but costs will remain relatively the same. Finally, as my friend Matron of Husbandry would point out, those chickens are eating bugs and dropping manure…that’s worth something. I also left off a charge for land use which varies between $50 and $200 per acre (though that is likely an expense shared by additional enterprises). All of that is the nonlinear part of this equation. Too many things vary. I didn’t even account for the possibility of a tornado blowing the birds away or a mink killing them all in one night. Adjusting vaguely for those missed values, we can begin to see Salatin’s argument more clearly. Once we pay our labor, each layer may only be making us $12 over the course of her life (and I suspect that includes selling her as a stewing hen).

Obviously economies of scale apply but I really don’t believe moving to 3,000 hens would boost annual farm income (before labor costs) to $72,000. I would have a heck of a time retailing 144 dozen eggs each day. Wholesale numbers would have to go up so margins would drop but, sticking with the $12/bird notion, spread over two years, after labor your 3,000 laying hen operation could bring in $14,000-$18,000 each year to the farm keeping someone very, very busy for 4-6 hours each day.

We prefer to keep the laying flock between 100 and 150 birds as a sideline business. Though marginally profitable, we don’t see it as a mainline enterprise. Just a part of the whole.  Remember what a cow costs? Individually, these enterprises won’t sustain us. Taken together, we have a chance.

UPDATE:
I had some offline correspondence with Matron of Husbandry who sent me a couple of links. I particularly appreciated the breakdown listed in this post. I came to $1.85 before labor because I didn’t count brooder costs, having supported that phase by selling pullets. That author comes to something on the order of $2.61 before labor, though the post lists something on the order of $5/dozen including labor and includes chick and brooder costs each year of production. Do the math any way you like as my math may be wrong and your numbers will be different. Selling eggs is a hard way to make a living.

Should I raise my prices? Probably. Should I just stop keeping layers? Maybe. But how boring would that be?