Economics of small-farm pastured eggs

We’ll be selling eggs to off-farm customers for the first time in 2012, having expanded our laying flock to 35 hens. In past years we kept up to a dozen, which laid enough for our own household and some for workers, but this year eggs will be available to CSA members for $6/dozen. That’s higher than anyone around here is used to paying, so I thought I’d share the economic modelling that led us to this price. For reference, our friends at Happy Hollow Farm in Moniteau county came to the same conclusions, and are selling their certified organic eggs at $6/dozen as well. Our eggs are not certified organic and should not be referred to as such, though we absolutely refuse to feed out anything containing GMOs, whether chicken feed or food scraps.

Egg production & gross income
We have 35 hens, but I’m going to use 30 here to provide some slush for losses and poor layers (some of our current hens are over 3 years old).  At their peak, 30 hens laying 5 eggs a week = 150 eggs/week. This winter, when most are taking a break (which they need to stay healthy), we’re getting around 60/week. You can up this with artificial light or other interventions, but that’s not healthy for the birds and we prefer to handle them naturally. So to account for the laying curve over the year, I used three different laying rates:

20 weeks at 150 e/w = 3000 egg
20 weeks at 120 e/w = 2400 eggs
12 weeks at 60 e/w  =    720 eggs

That’s a total of 6,120 eggs, or ~500 dozen.

At our high price of $6/dozen, that’s $3,000 gross income per year (not counting any expenses, including remitting sales tax from that gross). And that’s assuming every single egg from a year’s production sells, which it certainly doesn’t (if nothing else, there are always cracked, overly dirty, or otherwise unsellable eggs). In other words, that’s the most we could possibly earn in a year on a flock our size if we had no expenses for feed, labor, marketing, or anything else.

Feed expenses
Organic chicken feed costs roughly $.50/lb here, about twice what conventional feed costs. If it’s not certified organic, it almost certainly has GMOs in it, regardless of other “natural” type labeling, and that is anathema to us. Figuring that an average hen eats 1/4lb a day, and using 40 birds to account for roosters and poor layers, we get this:

40 birds * 1/4 lb = 10 lb/day
10 lb/day * $.50/lb = $5/day * 365 days/year = $1825 annual feed cost.

Now, this is almost certainly reduced by the birds being on pasture and fed lots of farm scraps, so let’s reduce that quantity by 1/3, making annual feed costs around $1200 (not accounting for the time & labor of acquiring and handling the feed). This doesn’t really account for the fact that organic feed is difficult to acquire here; we have to have it special-ordered from Wisconsin through a local feed store, as does Happy Hollow, but that’s what it takes to avoid GMOs in Missouri.

So far we’re down to $1800 in net profit annually, before labor or other expenses.

Labor expenses

This is the other big one. Labor involves visiting the chicken house twice a day to check feed and water and collect eggs, any fence-moving to keep them on fresh pasture (which we do often, even in winter), cleaning & inspecting eggs, packaging eggs for sale/distribution, dealing with any health/management issues within the flock, remitting sales tax to the state on any egg sales, and so on. Any accounting for labor should also take into account the reality that we (or an employee) have to be here just about every day of the year, in any weather, to manage the birds’ pasture access, water, and food. Overall, my basic daily chores take about 15 minutes; I’m going to double that to account for all the rest which is harder to track, and I still think that’s a low estimate.

30 minutes/day roughly equals 4 hours/week, or around 200 hours a year.

Assuming my labor is worth at least minimum wage, 200 hours/year * $8/hour = $1600. With our $1800 net profit after feed expenses, $1600 in labor pretty much kills the remaining budget. We’re now down to $200 in remaining cashflow, to account for any other expenses like infrastructure, water, straw for bedding, and bird replacement.

Long-term flock maintenance

People sometimes forget that chickens don’t live forever. They get eaten by hawks (especially pastured ones like ours), or die from old age/disease like any animal. In fact, we’re probably better off regularly culling birds past a certain age, for three reasons: (1) to avoid aged birds introducing disease into the flock, (2) to give them a cleaner, more humane death than decrepitude provides, and (3) to get a bit more value from them (a 3-year-old hen is still a decent stew bird; a real geezer is not). Why bury an old carcass when we can eat a middle-aged one?

The corollary to this is the need for regular introduction of new birds, either by purchase or breeding. We’ve opted for the latter, buying a small incubator so we can breed and raise our own, and hopefully improve the genetics of the flock (one reason we keep a number of roosters around). However you replace birds, it costs time and money that aren’t easy to factor into an annual budget, and that remaining $200 somehow has to cover this and everything else.

I didn’t include manure production/handling here, which can be a cost and/or a benefit depending on the farm. For us, generating on-farm fertility is a major reason we raise chickens in the first place, so there is some inherent value there, although it’s hard to monetize. What’s the actual value of using our own manure rather than feedlot manure, other than removing GMOs, antibiotics, and off-farm diseases from our input stream? Even for a benefit like this, there is still significant extra labor involved in regularly cleaning out the shed, hauling & composting the bedding, and otherwise managing the waste stream to be a net farm benefit instead of a problem (like it is for larger operations). So I pretty much figure the manure handling evens out; more benefit offset by more work.

Nowhere in this discussion have I budgeted for infrastructure. Everyone has to pay for, or value, the infrastructure needed to raise chickens, particularly if they’re being rotated on fresh pasture and not just let out to the same yard year-round. This includes fencing (whether permanent or moveable net), housing (whether building new or converting existing), refrigeration cost, feeders and waterers, and so much more. Even though we built our new shed from cedar lumber generated on the farm, that still costs chainsaw work & labor, milling fees, hardware, and roofing. These costs should spread over 20 years at least, but they still need to be there in the price of the eggs.

In effect, what these numbers tell me is that it’s possible to make at most minimum wage raising high-quality, organically fed pastured eggs, even charging the “high” price of $6/dozen, and that’s under a nearly ideal system in which few birds are attacked by predators and everyone lays to their potential. The real world is rarely so accommodating. Even if you quibble with specific numbers and estimates, you’d have to double or halve a major number to make a meaningful difference in the income, and that’s not realistic.

The same economies apply to conventional small-farm eggs, and to industrial ones. Let’s say we halve the feed costs for people just buying generic feed; we also then halve the price to the $2-$3/dozen typical of farmers market eggs, or even lower given that various country people sell eggs for ludicrous prices below $2/dozen. Given that feed and labor are roughly equivalent percentages of the whole, the same ratio holds: you’re making at most minimum wage in fairly risky business. People charging under $2 are simply insane, and those in the $2-$4 range really aren’t making much meaningful income if they’re accounting for their actual costs. They might be making a profit, but they aren’t making an income; there’s a big difference if you care about the long-term viability of local foods.

This tiny profit margin is why feedlot eggs sort-of work; you can afford to make a miniscule profit per bird if you pack ten thousand of them into a barn, keep them in artificial light throughout the year, pre-emptivally medicate them against inevitable health issues, and turn them into dog food as soon as they decline from peak production (and most of the profit still goes to the middle and corporate level, not the “farmer”, who still makes at or below minimum wage). But that system has also taught consumers that the “value” of a dozen eggs is lower than that of a few tomatoes, and so people are no longer willing to pay a reasonable price for a much more nutritional food. The price of cheap food is farmers unable to make a meaningful living at almost any scale.

It also tells me that many people selling eggs at farmers markets and roadside stands aren’t treating themselves like businesses. There is simply no way to actually make a living wage or meaningful income on eggs at the prices most people sell them for; the reality is that they’re not. They’re either doing it as a hobby, and/or not paying attention to their numbers. Lots of non-business-minded small farmers seem to equate gross income with actual income. In fairness, there are also people who do realize this, but just don’t think they can get a fair price (and often can’t), so charge whatever they can get because they like having chickens. That doesn’t change the economic reality, though, and hurts farmers who are trying to earn a living.

Personally, I think the skill and risk it takes to raise pastured eggs should be worth more than minimum wage, but $6/dozen is the only way we’ll even get that far, so we’re going with it for now. We agree with Liz at Happy Hollow, who’s said that if not enough people will pay minimum wage for good eggs, it’s chicken soup time and we’ll go back down to a home-sized flock. There are lots of easier and less risky ways to make minimum wage; neither of us will do this work, and take these risks, for less.

9 thoughts on “Economics of small-farm pastured eggs

  1. I will say, as one of Eric’s CSA customers, his eggs are the best I have ever had. And yes, I do typically buy free range, organic, locally produced eggs either at HyVee or at Farmers’ Market. While the eggs I had been purchasing for $3.50 or so are a big step up from the typical cheap, commercially produced egg, Chert Hollow eggs are a big step up again. Well worth the price. From a consumer standpoint, at $6 a dozen, I’m still only paying 50c an egg, so for a 2-egg breakfast, my bill is $1.

  2. Until a few months ago, Whole Foods sold pasture-raised eggs from Vital Farms for $6.00 per dozen. Then the price went up by 11%, with no apologies. They still sell well because good food costs more. Raise your price.

  3. I just came in from packing 2300 eggs from our own organic flock and have a few comments for you. I’ve read a few different blogs that have tried to explain the economics of this and many times I am struck by the gross inefficiencies described. Here’s a few thoughts for you.

    Use good quality stock. Hybrid sex-links will give you 22-23 dozen eggs in the first year of laying. Trying to breed “better” stock is a money-losing proposition for the small scale operation. Great stock is already available.

    Cull hens on a regular basis. We keep hens for one year of laying and then they are either butchered for their value as a stewing hen (there can be good returns here) or are sold to live markets where they are re-sold to become somebody’s fresh chicken dinner.

    Since these birds lay eggs and then become dinner we do use supplemental lighting. While it may seem “less than natural” I do not believe that it affects the health of the hens any more than becoming dinner does. Supplemental lighting also keeps them laying during the winter when demand for eggs is high. At retail, egg sales usually pick up as the school year starts, hit a high peak over the holidays, and then slow taper down to minimum demand in summer months. Running a CSA though, you may see quite the opposite. Your sales may be high as you have customers looking for fresh produce, but may lose your customer base for the rest of the year. You can use the that logic to support giving those hens a rest in the winter, but those feed costs will still be there, and are probably even higher in the winter when forage quality is down…

    Using good quality stock, culling on a regular basis, and using supplemental lighting, you should be able to keep an overall lay rate of 80%, which by my math gives you around 700 dozen eggs a year instead of the 500 dozen you had planned on.

    Perhaps the quaintness of a backyard flock is what you are selling, but on the other hand more efficient production is wise use of resources and more sustainable in the long run. I also feel there is a certain responsibility to the consumer to keep things efficient to keep cost down thus allowing more people to partake. I’m sure I could come up with a specialty egg that I could convince some folks to buy for $10 per dozen, but I am trying to make a living feeding people, not just collecting money from a fortunate few.

    Good luck with your new enterprise!

  4. Mac,

    Thanks for the useful perspective; this is the kind of discussion we were hoping to generate. I respectfully disagree with some of your conclusions, and will try to briefly address a few while intending to write a longer reply as a new post.

    Regarding the ethics of “trying to make a living feeding people, not just collecting money from a fortunate few”, in my opinion the idea that food should be cheap so everyone can afford it is a straw man that does not hold up. The vast majority of Americans have disposable income with which they make choices; they have the option to spend more on food, or certain types of food, if they want to. For example, all but the absolute poorest households likely consume soda and/or bottled water daily (don’t even get me started on cigarettes or cable TV). The last time I remember buying soda (2003?) it was $.50 a can; even if it hasn’t gone up in price since then, that’s the same price as one of our “expensive” eggs, and bottled water costs two eggs or more. Which has more value, a fresh, healthy, nutritious egg, a can of empty-calorie corn water, or half a bottle of tap water? Anyone who uses a vending machine to give the soda company a significant profit on their corn water, or who pays $1 for soda at a fast-food restaurant for $.10 of syrup, can also choose to buy good eggs at a much smaller profit margin for the producer. They may not, but it’s an active choice, not an economic hardship. To put it another way, someone who consumes a can of soda or a bottle of water daily has just paid for the price difference between our $6/dozen eggs and cheaper eggs at, say, $3/dozen over the course of a week. My argument is that the vast majority of American consumers are in a position to choose to spend that money with us if they want to. Whether or not they do is solely their, and our, business in a free market. But there’s no inherent unethicalness about expecting an equally fair and profitable price for our eggs as for soda or bottled water.

    As I said in the post, if not enough consumers are willing for my kind of chicken-raising to exist, we’ll eat the birds and stop raising eggs. But I won’t do it at a loss just to justify a false sense of efficiency that comes with the get-big-or-get-out mentality that’s been ruining small farm America for generations, and I won’t join the race to the bottom to get the cheapest food to the bottom 10% while the rest of the country coasts on underpriced food. If nothing else, the more middle-class Americans support farms like ours, the more tax revenue we generate locally that can help fund the support systems in place for those who truly can’t afford our food, as opposed to those who choose not to.

    Though you criticized the “gross inefficiencies” of small farms, the only ones you actually mentioned in our analysis were the interrelated issues of our use of heritage rather than hybrid birds, not culling them every year (we’re planning to cull every 3), and not lighting them, all of which relate solely to egg production numbers. Using your ideal number of 700 dozen/year rather than our 500, if I kept our price of $6/dozen, that’s $4200 gross. If I went down to $4/dozen, that’s $2800 gross. Assuming the feed and labor remain the same, I would then be making either $11/hour (at your production and our prices), with no money left over for other expenses, or less than $5/hour (your production, lower price), not accounting for any other costs. $11/hour isn’t bad (it seems to be about what a fast-food manager makes), but it’s not great either, especially when that’s not an actual guaranteed salary but a base self-employed income with a lot more risk and no benefits. And remember, that’s still at the high price you found offensive, not the lower price that simply doesn’t generate meaningful revenue.

    Even if I sold off all 30 birds every year at $10/pop, that’s only $300 more gross, from which has to come either the labor and infrastructure of on-farm butchering, or the transportation and cost of licensed slaughter, and then the marketing and distribution. Either way, as far as I can tell, the actual value of the birds as meat comes out breaking even or only a tiny addition to the profit margin. And replacing them every single year with expensive modern hybrid pullets isn’t cheap either; the going rate seems to be $2-$2.50/each plus shipping, meaning it would cost us over $50 annually to replace our flock, not including time to raise each chick to maturity, assuming they all survive. Buying mature pullets inherently includes this cost that someone else underwent, and is thus just as expensive. I don’t see the “good returns” here.

    I’m curious about your own numbers, given that you’ve questioned ours. How many layers do you have? What are your total labor & feed costs throughout the year, and how carefully are you tracking the former? What do you sell your eggs for, through what venue, and what is your annual profit margin? How do you avoid predator loss? Do you rotate your birds on pasture, or are they in a permanent structure? Do you work off the farm, or does your farm fully support your family? It’s hard to respond to your concerns without comparable numbers to help me assess the economics of your situation.

  5. Thanks for the reply. You do have some good points to make.

    I understand your arguments about the value of food, yet I tend to look at it from a different perspective. I do realize that people are used to dirt-cheap eggs and they could easily be valued higher, priced by the pound (rather than by the dozen) they look very attractive compared to other protein sources. I sell most of my eggs thorough an organic co-op (more on that later) and sell about 2000 dozen a year in direct sales. The direct sales are to folks who live within 5-10 miles of me in my rural area of Wisconsin. While most of my eggs are processed at a processing plant and shipped off to cities where they are purchased by those with more disposable income, my local sales are to folks who are keenly aware that the regional gas station chain (which has become the de facto grocery store for many of our rural villages) sells conventional eggs as a loss leader, everyday, for $1.09 per dozen. When I ask them for $2.50 per dozen, they feel the price is worth it for our jumbo, farm fresh eggs. While our eggs are certified organic I don’t believe that too many of them even understand what that means, they just want farm fresh eggs for breakfast. When I tell folks that our eggs that are marketed through the co-op sell for $4.25 per dozen in retail stores they really don’t believe that there are people who pay that much for eggs, nor do I believe that they would ever pay me that much for our eggs no matter how good they think they are. They would just go back to 89 cent conventional eggs. If you have a market that will pay more, great, but even I, being one that places a high value on good wholesome food, wince at eggs at much more than $4.

    I have no bias against small farms. Around here, where every farm is a small family farm, we are the smallest of the small with less than 10 acres. The 2500 hen operation that we run is among the smallest of the flocks in our co-op with the average size being around 6000 hens, still very small (yet family income earning) flocks compared to conventional production. All of the producers generally use the same model with a large, fixed hen house with plenty of green pasture around the hen house. We have a six foot horse fence installed around the pasture (expensive, but heavy duty, should last for 30 years) and mow a buffer strip on the outside of the fence to keep predators away. We occasionally lose a bird late in the summer evenings to owls, but we really don’t have too many problems with predators.

    As I said, we are members of organic marketing co-op. We have 2500 hens. We purchase ready to lay pullets at 18 weeks old. The flock is maintained on an all-in all-out basis. We produce eggs for 50 weeks out of the year and spend two weeks cleaning out a deep litter hen house, sanitizing, and making repairs to get ready for the next flock. The bulk of the eggs are packed on egg flats and stacked on rolling carts. Once a week a refrigerated truck comes from the co-op to pick up eggs from the farms in our area (much like a milk route) and take them to a contracted processing plant that processes and packs the eggs for retail sale. The co-op then does its own retail distribution. Our work only involves producing those eggs, not marketing them, for that we are currently getting just under $2.00 per dozen. A big part of the reason for us replacing the birds after one year has to do with retail sales. There is a certain stigma surrounding any form of synchronized molting for a flock. With our system we avoid these issues. The other reason has to do with egg size. The bulk of retail sales are Large eggs. Post-molt hens produce Very Large (or larger) eggs that we do not have a retail market for. On the conventional side, those eggs would go to a breaker plant and be used for egg products, but there is not yet a large market for those products on the organic side of things.

    What are our economics? We expect a net profit of $8-$10 per hen. That would be $20K-$25K for us. Last year we grossed around $105K, spent $17K on pullets, $53K on feed, $5k on utilities, supplies, repairs, etc., leaving around $30K in positive cash flow. Around $10k of that went to pay the farm’s allocated portion of mortgage principal and interest, and its property taxes. (In other words that money paid for a good portion of our mortgage and taxes, it depends upon how you want to look at that that money, as expenses that we’d incur anyway for owning a place in country with some acreage, or the farm portion actually paying for itself). The cost of fixed assets (aside from the mentioned mortgage principal) is not included in that evaluation. We also have some additional returns from investments in the co-op and some pass through tax advantages from the co-op.

    What do we put into into it for that money? 2-3 hours a day, or about 1000 hours per year.

    Getting back to the cost of pullets and possible profits from stewing hens (this is getting to be a long post!), I think there are some good gains to be made there.

    My numbers only include sales of eggs and not any sales of stewing hens as this is something that we are just starting to explore. We’ve raised broilers for ourselves and even raising them organically I’ve found the cost to be reasonable (last year i figured it up production costs to be $1.35 a lb). Yet, at the end of the year I have a whole barn of layer hens that are usually are sold at $1 per bird (if that). We’ve butchered many, many of these birds for our own uses, it’s practically free meat as the birds have already paid for themselves in egg production. Currently I am paying $7.00 per pullet ($17K last year for the whole flock). If I could turn the whole flock into stewing hens at $7.00 per bird, the cost of pullets would be almost free (save for the resources involved in butchering). Obviously I don’t have a market for that many hens, but any I do sell is almost pure profit on top of what I’ve made for eggs. You scoffed at a $10 return per bird, but then go on to say how expensive it would be to continually raise replacement pullets, but you should easily be able to raise a replacement bird for that $10, negating the cost of the hens and hopefully gaining some additional returns from increased egg production on a younger flock.

    That’s enough for now, gotta hit the sack sometime tonight.

    Best Wishes to You

  6. My wife and I were discussing this again this morning as we packed up eggs. One point that I haven’t touched on is that many of the livestock advocacy groups tend to use how long a layer hen lives as part of some sort of determination as to how humane a farm’s animal management practices are. They think that allowing hens to live a few extra years instead of being “used up” and “discarded” is somehow more humane. I think that is a moot point if you or your customers eat chicken. To say that a layer hen is somehow a “special” chicken and needs to be kept in production for several years in the name of being humane while a different chicken is being cooked for dinner is pretty nonsensical.

  7. We absolutely agree with your last point, and appreciate you making it. We butcher all our own household meat on-farm (goat, hog, deer, chicken, etc.) and the age of the animal has nothing to do with it, other than culinary considerations. We feel that eating an animal before old age and disease claim it is far more humane. Apologies if we somehow implied otherwise. We do feel that, in our model of pastured poultry, there are benefits to letting the hens live a few more years, such as their increased awareness of predators and new/young birds’ ability to learn useful and farm-specific cues and behaviors from the older ones. For example, our best roosters can distinguish between red-shouldered hawks, which don’t attack the birds, and red-tailed hawks, which most certainly do. They’ll alarm for a red-tail sighted or heard, but don’t waste energy on red-shouldereds; this is something younger birds pick up from the experienced ones, but is not likely to passed along with new birds every year from a hatchery.

    Beyond that, I definitely intend to continue this worthwhile and educated discussion, but can’t tonight. Thanks for your continued participation and perspective, and hope you’ll check in again in a day or so when I can find the time to respond fully. After a long stretch of warm and beautiful weather, we have two days of rain/snow coming, which will allow us to catch up on indoor/computer work. In the meantime, take care.

  8. Pingback: Comparing egg production models | Chert Hollow Farm, LLC

  9. My latest response got too long for a comment, and stands well on its own, so it’s published as a new blog post. Let’s migrate the discussion over there; also coming is a post discussing our rationale for raising heritage breeds and doing our own breeding.