Marketing-driven poultry production’s real feed costs

Marketing-driven poultry production’s real feed costs

No-antibiotics-ever, slow-growing and cage-free chicken labels work as differentiators, but how do these changes affect US feed production?

While U.S. consumers educate themselves about the poultry industry and become increasingly vocal about their expectations, restaurant and retail buyers have been paying attention.

No longer a niche, antibiotic-free poultry production, for example, moved beyond regulatory guidelines and went “mainstream” in 2015, with large retailers, restaurant chains and three of the largest U.S. poultry integrators (Tyson Foods, Pilgrim’s Pride and Perdue Farms) vowing to eliminate or reduce the use of antibiotics in the years ahead.

As poultry producers alter their meat marketing and production to attract the consumer, feed costs inevitably go up, and oftentimes the burden of off-setting these losses falls on the nutritionist and feed manufacturer.

According to WATT Global Media’s 2017 Poultry Nutrition & Feeding Survey, 42 percent of respondents reported that antibiotic-free production was the greatest challenge to their feed formulation program and/or feed costs; 27 percent cited slow-growing broilers; and 22 percent said cage-free production.

“In general, the new production systems require that we know more about different breeds, housing systems and production environments to ensure optimal nutrition is delivered,” said Henk Enting, a global poultry technology director with Cargill Animal Nutrition.

What are the true feed costs when adopting a new formulation program or production system? It remains to be seen. The consensus is there are too many variables to pinpoint an exact figure — especially on an international scale — so for the purposes of this article, we’ll focus on developments in the U.S. poultry industry.

The decline of antibiotics

According to the recent Food & Drug Administration (FDA) summary report, “Antimicrobials sold or distributed for use in food-producing animals,” the domestic sales and distribution of antimicrobials approved for use in food-producing animals decreased by 10 percent from 2015 through 2016, with a 14 percent reduction in the sale of antibiotics used in human medicine.

Of the 43 percent of medically important antimicrobials sold and distributed in the United States, only 6 percent was intended for chickens.

Sources state the move to antibiotic-free poultry production could increase live costs by up to 10 percent depending on the producer, on average increasing feed costs by US$3 to US$5 per ton. However, if a company is also switching to an all-vegetable diet while moving toward an antibiotic-free program, it might end up costing between US$4 and US$7 per ton.

“We are seeing re-optimization of feeds, where you have to know more about how growth promoters [influenced] performance to substitute these without negative effects on performance,” Enting said.

The National Chicken Council (NCC) estimates 45 to 50 percent of the U.S. flock is on a no-antibiotics-ever program (NAE).

However, NAE poultry production “isn’t for everybody.”

The feed is only one element of NAE production. To be successful, a company needs to be confident in its hygiene and management controls through the entire life cycle of the bird — and that begins at the breeder house through to the grow-out farm.

Slow-growing broilers

Slow-growing chickens can take twice as long to reach the same market weight as faster-growing strains, almost tripling production costs.

“For developments like slow-growing birds and cage-free systems, we must know how different breeds respond to different dietary nutrient levels to find economically optimum performance,” Enting said. How much more feed is required to raise slow-growing broilers?

“We can’t speak to all slower-growing breeds, but we estimate that our costs will increase about 25 percent,” said Scott Sechler, owner and president of Bell & Evans, a U.S.-based organic broiler producer.

The company recently announced the transition of its entire flock to a slow-growing strain, the Das Klassenbester, in 2018. The new breed’s growth cycle will be extended by more than 15 percent (47 to 50 days).

“We are estimating that our Das Klassenbester breed will require between 25 to 33 percent higher feed conversion to reach the same 5.6 pound average live weight we see now,” Sechler said.

The company estimates it will spend an additional US$14 million in feed per year, but he believes the cost will be offset by increased chicken sales.

“Our chickens already receive a high-quality feed, and that won’t change, regardless of the increased feed conversion,” Sechler said, also noting Bell & Evans’ flock is 100 percent antibiotic free. “We’ve always tried to slow down the growth of the faster-growing breeds by offering our chickens a high-quality, well-balanced blend of U.S.-grown corn and extruded and expeller-pressed soy, along with our own blend of essential oils like oregano, cinnamon and yucca. We don’t overfeed them or add fillers to plump them up.” 

Ultimately, Bell & Evans’ goal is to “raise a better-tasting chicken,” but detractors of the slow-growing birds cite the environmental impact of heritage strains (longer life = greater footprint) and the need for additional chicken production to make up for supply deficits as their downfall in commercial production.

Cage-free systems

Driven by the animal welfare movement, California’s Proposition 2/AB1437 and retailer’s pledge to only purchase cage-free eggs by 2025, the U.S. cage-free egg production has nearly doubled. According to the American Egg Board’s October 2017 report, 15.8 percent of the U.S. flock now consists of cage-free hens.

To meet the demand of buyers’ cage-free commitment, in less than a decade, U.S. egg producers must convert more than half of their production to “cage-free systems,” which allow hens room to stand, sit, turn around and extend their limbs without touching another bird or the sides of the cage.

According to the Coalition for Sustainable Egg Supply, aside from the capital costs incurred by growers, feed costs will increase as well: “While feed consumption per hen was similar across all [production] systems … feed cost per dozen eggs produced in the aviary was higher because production per hen declined more over the life of the flock.” Aviary systems had per dozen costs 36 percent higher than conventional caged housing systems; enriched colonies had costs 13 percent higher, the coalition reports.

Cage-free chickens require 15 to 25 percent more feed to produce the same number of eggs as modern cage systems, a United Egg Producers report states, estimating aviaries would requiring an increase of 1.5 million tons feed.

Who picks up the tab?

As these evolving, consumer-driven production models become the norm, producers and feed manufacturers will need to step up to meet new cost, formulation and production demands.

Today, at least with antibiotic reductions, much of the cost is absorbed by the producer, but as time goes on, this may no longer be the case. On the plus side, for example, according to a 2015 Consumer Reports survey, more than half of U.S. consumers are willing to pay more for antibiotic-free meat.

Slow-growth broilers have always and continue demand premium prices, but they also appeal to a certain subsect of the public. The U.S. egg industry, on the other hand, will continue to struggle as it transitions to a cage-free model.

References available upon request.

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