WASHINGTON – The drought that ravaged state harvests could also cost Maryland’s poultry industry upwards of $50 million this year as it drives up the cost of chicken feed — the single largest cost of production — as much as 30 percent.
State corn production was at its lowest level since 1993, and soybean yield was predicted to be at its lowest level since 1966, according to reports from the Maryland Agricultural Statistics Service.
With the majority of the corn and soybeans that feed Maryland’s chickens usually coming from the Delmarva peninsula, this year’s abysmal harvest has forced poultry producers to buy those crops from Midwest farms.
Poultry companies spent $433.7 million last year on the ingredients they used to make feed, but they expect to spend at least $50 million more this year, said Bill Satterfield, executive director of Delmarva Poultry Industry Inc.
Spokesmen for a number of Maryland poultry companies either refused comment on the feed situation or did not respond to calls. But an official at one company said the higher costs are hitting the industry hard.
“When you get these kind of cost increases, there’s no way you can offset it. That cash comes right out of your back pocket,” he said.
The official said companies cannot raise prices because the market is flooded with poultry, and they cannot afford to lay off employees. Instead, they are trying to cut production costs and are offering fewer pay increases and no bonuses for top executives and growers.
Other than the lack of bonuses, “we don’t feel too much of it,” said Douglas Green, who has been raising chickens in Somerset County for 23 years.
But a real hit to the industry would surely be felt on the Shore. Satterfield said there are about 2,500 Delmarva families that raise chickens for companies like Perdue, Mountaire, Allen Family Foods Inc. and Tyson Foods Inc.
“(Raising chickens) is something people can rely on,” Green said. “It’s made a lot of mortgage payments for people around here.”
Growers like Green are responsible for housing and caring for the birds that they get from the companies along with feed and medicine. Green said he makes about 90 percent of his income from the chickens, which he needs since crop production on his 200-acre farm will not begin to cover his field expenses this year.
Because growers are contractors and most already work at maximum efficiency, it is nearly impossible for them to reduce their operating costs, Green said. Another barrier to cutting production costs is that once birds are “placed,” the company has to feed them for the seven weeks it takes them to mature.
“You just can’t turn the switch off and on like you would in an automobile assembly,” Satterfield said.
The only way to decrease production levels is by planning months ahead of time to place fewer chickens. Some companies are cutting back on placement and on market weight requirements, said the industry official, but not by much.
Although companies cannot increase prices now, the official expects prices will go up across the board within the next six months. Before that happens, lean times might force some producers out of business, he said.
“In the short run, it’s very painful . . . In the long run, something’s going to have to change to bring supply and demand back to a better balance,” he said. “People can’t continue to lose money forever.”