Friday, April 3, 2015

Why are Your Organic Eggs SO Expensive?

I've posted on Facebook before, and in here, some links where other folks have done the math for the price of pastured chicken. But now that we have switched to organic eggs, I see and hear folks who don't like the pricing. Let me remind you that we switched because so many people kept asking for them, we thought it was time and that the market was ready.

So I thought I would share with you the math behind our pricing, that will show you the costs of feeding an organic hen, as well as what ends up being the profit for us. You'll be surprised at the result. And basically, no, we are not gouging you and no I don't have the answer for how to bring prices down. The organic feed cost, end of story, has to come down. It's still a niche product, at least for us small farmers. I could get a better price if I was buying hundreds of tons per year.

Let's put that a bit into perspective too, possibly there are other areas of the country where organic feed prices are lower, but in Colorado, I have two options for bulk organic feed. Ranchway and Fehringers. Fehringers delivers in one ton totes. Their price is lower per ton, something close to $800/ton vs $1000 per ton at Ranchway (I've also heard their feed isn't as high quality, but I don't know). It's trucked in from Nebraska and I don't know the delivery fee, so the cost difference may be negligible  The totes don't work on our farm. They are still at risk for mice getting into my grain, and since we don't have any equipment to move that tote, it may also be at risk for sheep exposure. Chicken feed is poisonous to sheep, so having grain on the ground is a big no-no my farm. That leaves me with Ranchway, who will deliver feed to me, and put it in my grain bins. That keeps the feed off the ground, no sheep, no mice, and makes it easier to fill my wheel barrow for weekly deliveries out to the chicken feeders.  Any mill in California, Iowa, or any place else is too far away to deliver one or two tons of feed to my little farm. The delivery price would be more than the feed.

Tonnage price:  $1009
One ton consumed: 6 weeks
Annual feed cost: $8745
Chicken life span (on our farm) 3 years
Cost to feed my flock for their life: $26,234 
That's like a new VW for me every 3 years!

Estimated average eggs laid per day over the live span of the flock: 57.5
Number of weeks they lay over their life time: 130
(they don't lay for the first 6 months, but I still have to feed them, next estimation also includes winter down time, as we don't force them to lay)
Average eggs laid by my flock over their life span: 53013
Someone better start making omelets!

Cost of feed per egg laid: $0.50
Selling price per dozen: $6.50
Sale price per egg: $0.54
Profit per egg: $0.04  - PENNIES per egg comes back to me in profit.
Daily Profit: $2.32
Annual Profit: $848.50
Profit over the life of the flock: $2108.71

That's a pretty tight margin. We're not making much money, Not even enough per day to buy a meal for a human on this farm.  The other thing it does not take into account is water for the birds, as well as the labor included in feeding them, filling their water, cleaning their coops, collecting their eggs, cleaning their eggs, and the cost of cartons (which, at the lowest cost by buying 20,000 at a time, they are $0.21/carton - so no, I am not buying new cartons, but reusing old ones). It doesn't include much money to cover equipment - waterers, feeders, brooders, and keep in mind, we don't see any income until we have eggs to sell, so we are spending 6 months buying them expensive feed, before we even have a single egg to sell. It also doesn't include the cost of obtaining the chicks, and the electric bill to run their brooder to keep them warm as babies. That tells me we aren't making a profit at all, but hoping we are just breaking even.

We almost got out of the egg business, and are considering it again. It is the highest labor item we have on the farm. We HAVE to collect eggs every day. We have to wash them, package them and store them. And it takes 6 months before we see a profit. We'll keep our girls for 3 years, but I'll be honest, we aren't selling many eggs, and I believe it's due to the price, which as you can see, we can't reduce. If organic feed prices don't go down, we may have to ditch the egg layers OR put them back on traditional feed.

As a comparison, that same ton of feed in traditional feed (which may contain herbicides, pesticides and GMO grains) it costs me less than $400. Yes, it's the only difference between my organic and traditional eggs. It's just the feed. They get the same water, live outside in the sunshine.  I won't do all the math again, but the ANNUAL profit on my traditional eggs, is higher than the 3 YEAR profit for the organic eggs. The organic feed is 3 times as expensive as traditional feed. This is purely supply/demand pricing. We need more folks to want organic feed, which will hopefully encourage more folks to grow it, and start seeing some cost reductions based on efficiencies in growing, transporting, milling and marketing these grains.

Until then, organic eggs are expensive. How are the grocery stores getting them less expensively than we are? They likely have contracts directly with a feed mill who delivers 100s of tons of feed per year instead of a dozen tons of feed. They likely raise THOUSANDS of birds in an airplane hangar, and possibly in an area of the country where grain prices, in general, are lower.  I have a hundred birds right now, not thousands. I have only 2 grain options, and neither are budging on price.

This math just isn't adding up. And I can't lower my prices, or I'll lose money, which eventually means I lose the farm. Tight profit margins like this also mean we both have to maintain our off farm jobs to pay our mortgage and feed our family. And yes, I pay for every egg we eat, full price. Sometimes, in the course of the week, it's the only eggs we sell. So the price is certainly a problem.

I don't see us producing organic eggs for very much longer...