,>* .s*'"K. Division of Agricultural Sciences UNIVERSITY OF CALIFORNIA e EGG PRODUCTION Business in California ARTHUR SHULTIS ALIFORNIA AGRICULTURAL EAperiment Station Extension Service CIRCULAR 483 r^> 25 /O Poultry is BIG Poultry farms by counties from 1 954 U. S. Census of Agriculture. The areas (num- bered from 1 to 6) are groups of counties shown in table 1 . 1 North Coast 2 Central Coast 3 Sacramento Valley 4 San Joaquin Valley 5 Mountain 6 Southern California l 00 ^-*. 23 ••* •••*« 'S2/ 7og 792 /S business in California... . . . where the large and growing population creates a good market for eggs and chickens and turkey meat. Around 11,000 specialized poultry farmers produce for this and other markets. Table 1 shows data from the 1954 United States Agricultural Census by agricultural regions of the state; the map shows the agricultural regions of the state marked with the number of poultry farms by counties. In 1954 the total value of poultry and eggs reported sold by farms in the census was $188 million — more than 8 per cent of all sales of farm products. Income from egg and poultry sales is estimated each year by the California Crop and Livestock Reporting Service. Table 2 shows selected data for the last ten years. The cash farm receipts for all poultry and eggs were estimated at $256 million for 1958 — 9 per cent of the total for all farm products. Receipts from eggs were $154.6 million; farm chickens, $10.2 million; commercial fryers or broilers, $33.2 million; and turkeys, $58 million. Production of eggs and poultry takes place almost entirely on specialized farms devoted to a single product. Eggs, fryers or broilers, and turkeys are special- ized businesses not conducted on the same farms. After a brief mention of each kind of poultry business the remainder of this circular is devoted entirely to the business of producing chicken eggs. THE AUTHORS: Arthur Shultis is Extension Specialist in Farm Management and Associate on the Giannini Foundation. W. E. Newlon is Extension Specialist in Poultry, Emeritus. NOVEMBER, 1959 Poultry farms not chicken egg type Turkey Farms California leads all other states in turkey production. Table 1 shows, ac- cording to the 1954 U. S. Census of Ag- riculture, 6,125 farms reported 9,911,034 turkeys raised. Some of these turkeys were on small farms producing for home use but the great bulk of production was in large, specialized businesses. Table 1 shows 55 per cent of the turkeys raised in the San Joaquin Valley in 1954 and 23 per cent in Southern California. For 1958, the California Crop and Livestock Reporting Service estimated 842,000 breeder hens on hand on January 1 and 13.6 million turkeys raised. These were mostly of the heavy breeds, with the av- erage weight of all turkeys sold 18.8 pounds, and the price 22.7^ a pound. In- come from turkeys sold came to $58 mil- lion. The 1958 hatch of poults from 88 commercial hatcheries was 15.5 million. The production of turkey hatching-eggs has furnished extra earnings to many turkey growers. Fryer Farms Fryers (called broilers in much of the United States) are young chickens of the heavy breeds and crosses raised to an average weight of around 3.2 pounds at from 9 to 10 weeks of age. The prevail- ing type of fryer enterprise in California consists of obtaining a large number of baby chicks (10,000 or more) at one time, raising them to market age, selling all at once and, after cleaning up and resting, getting the next batch, with around three to four broods a year. In the past, this business had not been so stable and profitable as the chicken-egg business because of low prices resulting from the shipment into California of great quantities of ice-packed birds from other states. Most of the United States production of fryers and broilers is under some form of integration or under con- tract with hatcheries, feed dealers, or processing plants. Sometimes returns to the producers are lower than would sat- isfy a prospective producer who had more lucrative employment opportuni- ties. As time passes, areas of unprofitable production should become more stable and profitable. Great improvements in methods and efficiency of production and marketing in California have been made and we expect the time to come when local producers and handlers can make an adequate profit per bird in competi- tion with other areas. In 1958 California produced 47.8 mil- lion fryers, which brought an average of 21.0^ per pound or a total of $33.2 million. Hatcheries There were 133 commercial chick hatcheries in California in 1958, a de- crease from the previous year. These hatcheries produced 106 million chicks, of which 52.2 million were broiler-type and 54.2 million were egg-type chicks. This total hatch was 11 per cent more than in 1957. Hatcheries are becoming fewer and larger. Some operate their own breeding flocks but many contract for all or part of their hatching eggs from specialized breeders or egg farms which produce hatching eggs under their super- vision or to their specifications. Chicks of the best breeding for egg and fryer production are available from California hatcheries. 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A few of these enterprises may be asso- ciated with other farm enterprises such as a fruit or general farm but most are specialized farms where a large number of laying hens are kept in special build- ings on a small acreage. No chickens are raised for meat on these egg farms al- though hens when culled or removed for age are sold as "farm chickens" for meat. Replacements are generally raised from baby pullets of egg breeds obtained from hatcheries although a few egg producers buy their replacement pullets at 12 to 16 weeks of age from a hatchery or from a poultryman who specializes in the busi- ness of starting pullets. PROFIT IN THE BUSINESS The population of California furnishes a large market for eggs. With the state so far from the surplus egg-producing region in the Midwest, the price of eggs is usually higher here, with some eggs shipped into the state to meet local needs. There are times, however, when produc- tion in Southern California is slightly above local needs; then some eggs are shipped out, thus reducing any local price advantage. Although there is no certainty that egg production in Califor- nia will remain at or below needs here, the long-time outlook is good for reason- able average profits over the years to effi- cient egg producers. But prices, influ- enced by local production and by total production and prices in the United States, do fluctuate considerably. As a result, local egg producers have periods of rather good earnings followed by pe- riods of very low profit, if any. Under good prices, production soon expands through a few new producers attracted to the business and through established producers increasing their operations by purchasing more chicks. In about five and one-half months, these Table 2. California Chickens, Eggs, Prices, Cash Receipts, Item Hens and pullets of laying age, Jan. 1 Eggs produced Price per dozen eggs Cash receipts, eggs Egg-feed ratio f Total chickens and broilers raised 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 thousands 17,241 19,502 20,177 20,312 21,016 21,084 21,333 20,978 20,936 21,289 millions 3,117 3,469 3,485 3,574 4,183 4,350 4,404 4,500 4,603 4,871 cents 51.4 41.5 54.2 47.0 53.2 38.5 41.7 39.6 36.9 38.9 thousand dollars 126,358 114,298 151,083 134,655 180,126 136,097 149,425 145,002 138,283 154,628 pounds 12.5 10.3 12.0 9.8 12.0 8.8 10.0 9.7 9.1 9.9 thousands 56,157 66,749 76,421 76,593 76,791 79,657 77,404 80,418 69,269 76,454 * Source: California Crop and Livestock Reporting Service, Poultry and Hatchery Production in California. Summaij for 1958. t Egg-feed ratio = Pounds of feed equal in price to a dozen eggs. t Broiler-feed ratio = Pounds of feed equal in price to a pound of broiler or fryer, live weight. young pullets begin to lay. Egg produc- tion increases and usually results in a price decline. Under lower egg prices some producers fail and go out of busi- ness while others, who ordered fewer chicks than they would have ordered under good egg prices, survive. Soon, production declines and with the smaller supply of eggs, prices improve, thus com- pleting a cycle. These cycles, which usu- ally vary from two to three years in total length, are about the same in California as for the United States as a whole. With current trends toward larger businesses and more integration these cycles are not expected to be so pronounced in the fu- ture. A period of low or high prices and earnings seldom coincides with a calen- dar year; it therefore does not appear distinctly in the annual averages showing egg prices and total receipts for eggs in table 2 and earnings in the Poultry Man- agement Studies in table 3. These annual figures, however, do show rather wide variations in prices and earnings from year to year. d Cost Ratios Average price per pound broilers Broiler-feed ratio J Cash receipts, all chickens cents pounds thousands dollars 31.0 not available 47,642 30.8 not available 59,224 30.9 not available 71,875 31.2 68,125 29.0 5.4 63,953 26.2 4.6 56,724 27.9 5.2 55,105 22.0 4.2 49,544 21.6 4.2 39,159 21.0 4.1 43,387 Management Studies Since 1925 some egg producers have been cooperating with the University of California Agricultural Extension Serv- ice by furnishing detailed records in what are known as "Poultry Manage- ment Studies." During this long period enough records have been obtained to show the progress toward higher effici- ency of production and variations in prices, costs, and earnings. Figures for the last six years are shown in table 3. These figures apply only to the hens and farms in this study and do not represent an average for the state as a whole. We believe, however, that figures are typical of the results obtained on the better egg farms of commercial size. They show what a producer who follows good meth- ods can obtain in the way of production, what his costs are, and the range in earn- ings per hen he should be able to make with changing prices over the years. Earnings are shown in two ways in table 3. Management income is the true managerial profit over all production costs, with the value of the operator's labor and interest on the current invest- ment in the chicken business included in costs. Interest on investment is figured at 5 or 6 per cent (it varies in different counties and years) on the remaining or average value of depreciable buildings and equipment and current values of poultry and feed on hand and of land used for poultry. For the medium-sized business with most of the labor per- formed by the operator the farm income is the best measure of his total earnings from his poultry business for his man- agement, labor, and all invested capital. Farm income is the amount by which income exceeds cash costs and deprecia- tion. From this would have to come any payments of interest and principal on in- debtedness. This farm income less any interest paid would approximate the net farm profit as shown by the farm sched- ule for income tax. [7] Table 3. California Poultry Management Study Averages for Six Years Item 1953 1954 1955 1956 1957 1958 Number of flock records .... 244 222 194 199 163 203 Average number of hens per flock 2,754 3,002 3,165 3,742 231 19.6 4,088 233 19.5 4,899 233 19.4 Eggs laid per average hen . . . Dozens sold per hen* 213 17.9 223 18.8 229 19.0 Per cent mortality, hens .... Per cent of hens culled 14 83 14 94 14 82 13 86 13 75 13 78 Average feed price per CWT Pounds of feed per hen $4.09 129 $3.81 129 $3.73 129 $3.72 128 $3.45 120 $3.38 117 Hours of labor per hen 1.3 1.2 1.2 1.0 1.0 0.8 Average price per dozen eggs Net cost per dozen eggs Management income per dozen 52.50 41.3 11.20 37.60 37.7 42.60 36.1 39.70 34.9 36.70 32.7 37.50 30.7 -0.10 6.50 4.80 4.00 6.80 Income per hen from : Egg sales $ 9.40 .66 .07 .25 $ 10.38 $7.06 .51 .05 .15 $8.11 .62 .05 .31 $7.76 .50 .05 .18 $7.14 .31 .03 .16 $7.29 .37 Poultry sales Miscellaneous income .... Increase poultry inventory .04 .22 Total income per hen (A ) $7.77 $9.09 $8.49 $7.64 $7.92 Expenses per hen Total feed cost $5.32 .53 .58 .29 .45 $4.96 .50 .55 .30 .43 $6.74 .80 .25 $4.96 .54 .50 .30 .28 $4.79 .49 .44 .31 .33 $6.36 .92 .26 $4.17 .46 .49 .32 .35 $5.79 .81 .26 $3.99 Poultry stock bought Miscellaneous costs Depreciation Hired labor .51 .50 .32 .44 Cash and depreciation costs (B) $7.17 .95 .25 $6.58 1.02 .25 $5.76 Value of operator's labor. Interest on investment. . . . .59 .25 Total all costs (C) $8.37 $7.79 $7.85 $7.54 $6.86 $6.60 Management income per hen (A) -(C) $2.01 $ -.02 $1.24 $ .95 $ .78 $1.32 Farm income per hen (A) -(B) $3.21 $1.03 $2.51 $2.13 $1.85 $2.16 Dozen eggs sold may differ from those laid. Eggs laid are counted as gathered. Dozens sold are actual sales. [8] The year 1953 was one of excellent egg prices (52.5^) with an average manage- ment income, profit over all costs, of $2.01 per hen, shown by poultrymen keeping records in the Poultry Manage- ment Studies (table 3). The very next year, 1954, egg prices were much lower (37.6^) and cooperators in these studies showed a loss of 2^ per hen, the first loss since 1933. Then 1955 was a good year again followed by a fair year in 1956 and one of slightly lower earnings in 1957, with a better year in 1958. As this is written in mid-1959, production and hatching of egg-type chicks were high in 1958 and lower egg prices and profits are expected for this year and 1960. What Earnings Can You Expect? On the basis of recent records, we be- lieve the efficient poultryman can ex- pect an average net farm income of about $1.75 per hen in flocks of from 2,000 to 5,000 hens. The average for the six years 1953 to 1958, inclusive, was $2.15, but we expect future earnings to be lower. We would expect a little less farm income per hen in smaller flocks not up to an adequate commercial scale, and a little less farm income in larger farms where more of the labor needed must be hired. Plan for the size of busi- ness to meet your income needs for liv- ing and debt repayment — 2,000 hens for a $3,500 average net farm income, 4,000 for $7,000. You will not make this every year — much less in years of low egg prices and more when prices are good. SIZE OF BUSINESS Size of flocks has been increasing steadily over the years. The average size in our management studies was over 4,000 hens in the last two years but this average includes some flocks consider- ably smaller and a few that were much larger. With modern housing and me- chanical feeding, annual labor require- ment is now down to around one hour per hen. This is for all work, including some raising of replacements and pack- ing of eggs for marketing. A man with a little assistance from his wife could prob- ably handle 4,000 hens in 4,000 hours of available time. With a full-time hired man or partner, 8,000 to 10,000 hens could be handled. Because of the confining nature of the 365-day-a-year work required, a size for two full-time workers of around 8,000 to 10,000 hens has some advantages. Either can do all the essential work during ill- ness or vacation. The enterprise can be a joint operation of partners, such as a father and son, but more often is of an owner-operator and full-time employee living on the farm. Some larger farms employing several workers are successful. But management must be good. Personnel problems with disinterested employees in addition to price and disease hazards make the large business somewhat more hazardous than the moderate-sized business largely op- erated by the owners. It would seem wiser to grow larger with success than to start large without experience. The sample investment costs shown in table 4 for a flock of 4,000 hens come to an average investment of $5.00 per hen or an original cost of around $7.00 a hen, not including the operator's dwell- ing. The capital available may limit the size of business even though the working ability and income needed by the owning family would call for a larger size. It is a mistake for the beginner with inadequate capital to start too small a business in the hope of accumulating sufficient capital from earnings to in- crease the size later. It seldom works out that way. Income will be too small for living, paying debts, and increasing the business. Such a small business dooms the operator to a continuing low level of income for living, and probably of fail- ure and loss of invested capital. [9] Table 4. Typical Investment for 4,000-Hen Egg Farm Original cost, 1959 Yearly depreciation Average value Total Per hen Land 2 to 5 acres 5 Colony cage grow-lay houses, equipped 1 Brooder house, 20' X 48', with equipment . . 1 Egg room and service bldg. 20' X 24' 3 Bulk feed tanks of 6 T capacity $ 4,000 8,000 2,000 1,600 1,200 1,000 1,000 500 $ .... 500 100 80 60 50 100 $ 4,000 4,000 1,000 800 600 500 500 500 $1.00 1.00 .25 .20 .15 Water system, well, pump, piping, et cetera . Feed cart, misc. equip., and tools .13 .13 Paving of drives and service area .12 Subtotal, land, bldgs., equip. . $ 19,300 7,000 1,100 $ 890 $ 11,900 7,000 1,100 $2.98 Poultry stock 1.75 Feed and misc. supplies .27 Total poultry enterprise investment Dwelling and 0.5 acre of land $ 27,400 12,600 $ 400 $ 20,000 $ 6,500 $5.00 $1.62 Total poultry farm $ 40,000 $ 1,290 $ 26,500 $6.62 The farm couple wishing to enjoy a reasonable level of living will probably have a net income goal. If this were $7,000, it would call for a flock of 4,000 average hens which, at $1.75 a hen net farm income, should provide an average income of $7,000. When they approach that goal and wish to expand for more income, they probably can do so particu- larly if they originally obtained enough land for future expansion. Location Successful commercial egg farms are found in most parts of California. It would be a handicap, however, to locate in an isolated area of sparse population where transportation of feed to the farm, and eggs and poultry to market would greatly increase costs. Most successful egg farms are near a large consuming center which offers several marketing channels for eggs and several sources of feed, supplies, and essential services. But avoid a location in the path of a growing city where you may be forced out by high costs and zoning regulations. A clean lo- cation in an area without a high intensity of chickens might give a small advantage at first in the control of diseases and par- asites, and perhaps in lower land costs. Climate Insofar as production efficiency is con- cerned, the year-round climate is not an important factor in selecting a location. There are successful enterprises in many districts in California — from the cool coastal region through interior valleys with hot summers to the mountains with severe winters; from the dry desert re- gion in the southeast to the high rainfall region in the northwest. With housing and other facilities suited to the climate, the chickens will not be affected adversely to a serious degree. The operator should consider climate more from the stand- point of preference in where to live and work. Land The acreage required for an egg farm is small and the quality of soil is not important except that it should be well [10] drained. On level ground the construc- tion of buildings and driveways will be less expensive and future labor costs will be lower. The acreage will vary with the ultimate goal for size of business. Gener- ally recommended is a 50-foot or larger spacing between the brooding and rear- ing houses on one hand and the laying houses on the other, and a 100-foot space from poultry houses to property lines for sanitation and fire safety. But this must be weighed against the cost of additional land and its subsequent care or use in maintaining good appearance and avoid- ing a fire hazard from dry weeds. Con- sider also the need of land for future ex- pansion. Chicken houses, service buildings, and driveways for an egg business of 3,000 hens plus a dwelling can be placed on as small an area as two acres. Four acres would provide for greater spacing of initial buildings and a wider "insulation" strip around property lines; it would be available for doubling future capacity and adding a second dwelling. Idle or surplus land on the small poultry farm is rarely used in crop production. Produc- tion of green feed is no longer necessary or economical because the vitamins and other benefits for which it was recom- mended many years ago are now ade- quately supplied by available mashes. A quarter to a half acre will supply all the space usually needed for a family dwell- ing with adequate set-back from the high- way, landscaping, outdoor living and recreation space, and a family orchard and vegetable garden. Housing for Layers Three main types of housing for lay- ing hens prevail, each with many varia- tions. The oldest and formerly main type was the large pen in which hens were kept on a floor provided with litter, gen- erally called the floor or litter-type pen. Of recent popularity is the cage type, where one or two hens are kept in indi- vidual wire cages. These cages usually stand in a single row on each side of an aisle, placed at a convenient working height for the operator. The other type, usually called colony cage, is where there are several hens, 10 to 20 or more, in a larger cage or wire-bottomed pen. These pens also usually stand along both sides of a service aisle at convenient working height. Comparison of the over-all results obtained in the form of net income per hen or per man by these three main types shows no clear-cut advantage for any one type. Our conclusion has remained firm for many years that among the many fac- tors influencing profit in the egg business the type of housing is not an important one. The important aim is to design any type of building to fit the local climate and to provide adequate protection, ventilation, and cooling for the birds, and good working conditions for the operator. We recommend no one type here. Instead, we suggest that any one interested in making a housing choice visit one or more of each type, discussing advantages and disadvantages with the operators and the local University of California Farm Advisor working with poultrymen. The local Agricultural Ex- tension Office, through the University's Farm Building Plan Service, also has a list of poultry house plans available for a small charge and several free bulletins and leaflets on poultry. Housing for Brooding and Rearing Replacements It is still the prevailing and recom- mended practice for the egg producer to grow his own replacement pullets, al- though some buy "started" pullets. Sev- eral types of housing are used. In South- ern California, with its mild climate and low rainfall, there is considerable brood- ing in small outdoor units called "sun- shine brooders." When chicks are old enough (6 to 8 weeks) to leave the brooders, they are moved to rearing pens [in or cages similar to the colony cages in laying houses. In colder, wetter climates where the operator desires protection from the weather, chicks are brooded in special brooder houses or in floor-type laying houses equipped with removable brooders. One square foot of floor space per chick is recommended in brooding on the floor. Birds are moved to addi- tional rearing space or laying houses as space utilization and replacement cycle require. In planning an egg farm many factors and preferences must be con- sidered in selecting facilities and arrang- ing for the rearing of replacements, if included, and in locating the structures needed. In colony cages, 1 to 1.5 square feet per bird on wire are used. Individual cages are about 1 square foot in area and dual cages furnish about 0.8 of a square foot per hen. Some types of floor houses and all cage houses now contain service aisles not used by the birds, so house area per bird capacity is greater than pen or cage floor space per bird. Adequate feeding space for all the birds in a pen to eat at one time is im- portant. A general recommendation is 6 inches of feeder trough space per hen. Water trough space can be considerably less and will vary with design of house and facilities. Other Buildings and Facilities In addition to chicken houses a build- ing for handling, cooling, and holding eggs under refrigeration on the egg farm is essential. For a detailed description of how to construct and operate a mechani- cally refrigerated cold room see Califor- nia Agr. Exp. Sta. Cir. 405, "Cooling and Holding Eggs on the Ranch." Feed is now largely purchased in bulk and de- livered and placed in bulk tanks or bins from which it is withdrawn, as used, by gravity or mechanical conveyors. The feeds used and the layout of the farm will determine the size, number, and location of the bins. Where whole grains are used, it is often economical to have additional storage for large purchases of grain at seasonally low prices. A service building for storing supplies and small equipment and for making repairs is also needed and can be a part of the garage or building containing the egg room. Since large, heavy trucks will deliver feed and pick up eggs, adequate driveways and turning space must be provided. Space Requirements In floor-type laying houses, 2.5 square feet of floor space per hen is recom- mended, although some get by with less. [ Investment The investment shown in table 4 is only a sample within a rather wide range of separate item costs which vary with local land values, types of buildings, equipment such as mechanical feeders, and many other items. There is consider- able overlap in the ranges of cost of the three main types with different designs, quality of materials, and methods of con- struction. This sample is based on the climatic zone around the San Francisco Bay area with building costs shown at about the middle of the range reported recently. House costs are complete as constructed on a contract basis and in- clude the installed equipment, such as nests, watering system, feed troughs, and lights. Costs are based on the colony-cage type of laying house, which may be a little less than floor type and is usually less than individual cages. The average value shown is with depreciable build- ings and equipment at half the original cost since this approximates the average lifetime value as depreciation reduces the remaining investment from cost to nothing. The depreciation shown was estimated on a sixteen-year life for the growing-laying houses, twenty for the other buildings, and ten for the equip- ment. 12] Replacements Needed It is more profitable to replace layers when they are 18 to 21 months of age than to keep them longer. You will have a younger flock laying more eggs per hen, with eggs of higher quality, than if you keep the layers for a longer time. To maintain a flock averaging 4,000 hens (layers over 5% or 6 months of age) through a year you will have to add about 90 per cent of that number or 3,600 new layers each year. Table 3 shows a Poultry Management Studies mortality or death loss of around 13 per cent and a culling or removal for age of 83 per cent of the average number of hens. Count on obtaining over 900 pul- lets of laying age from 1,000 pullet- chicks — some do better. These replacements are best raised from baby pullets by the poultryman on his egg farm. For disease prevention it is important that there be no contact be- tween different broods or ages of chick- ens. Some may carry diseases another brood has escaped. When a brood of pullets reaches 4 to 5 months of age it can be moved from brooding and rear- ing houses into a laying house that has been emptied and cleaned. Here these layers will stay for about 15 months, until they are removed for age or to make room for the next batch. They should be kept as long as profitable since profit on the egg farm can come only from egg production. More replacements than are necessary reduce profit since the cost of buying a baby pullet and raising it to laying age is over $1.50 while a cull hen brings about 40^ or less. That is why ade- quate housing for layers and a well- planned replacement schedule are im- portant. To maintain a certain average number of hens for the year it is necessary to have an excess capacity for layers. A thousand new layers at about 6 months of age will decrease in number, at an average rate of around 1^2 per cent a month with death losses and some re- moval of obvious culls to around 840 a year later — averaging about 920 layers for the period. Hence, at certain times of the year you will need laying house space for more layers than you hope to average for the year. In maintaining an average of 4,000 hens you should have space for 4,800 at one time if you brood replace- ments three or four times a year, which is common with colony-cage or floor-type housing. With individual cages it is com- mon but not recommended to brood re- placements more times a year, sometimes as often as once a month in order to have new layers available to replace older layers and culls as they are removed. Brooding replacement groups too fre- quently is questionable from a disease- control standpoint. Replacement Cycle In planning a new egg farm it is well to provide housing to fit a definite re- placement program but with enough sur- plus space to permit some flexibility. Although excellent stock is now avail- able, some broods turn out better than others or a bad incidence of disease may require additional brooding beyond that planned. To illustrate this point, let us consider the sample egg-farm investment for a flock averaging 4,000 layers. A brooder house and five growing-laying houses are provided. With brooding four times a year, 1,000 baby pullets would be started in the brooder house about every three months. At 2 to 2% months of age, reduced to around 950, they would be moved into an empty house where they would remain as long as kept — to an age of 18 to 20 months. To avoid having more than one brood in any house at one time, five houses are needed — one more than the number of broods per year — since each brood is in a house for 14 to 16 months. Under this plan, the brooder house is used four times or 8 to 10 months out of the year, and the growing-laying houses are com- [13] fortably filled except for about a month or so for clean-up in four of the five houses each year. There is surplus brood- ing and rearing capacity for another brood if needed, and each batch of pul- lets can remain up to 21 months of age if needed. SAMPLE INPUTS AND COSTS An input is something put into the operation of an enterprise, in the case of a chicken farm, feed, labor, replacement chicks, and many other items. The oper- ator has some control over inputs and must make wise decisions as to kind, quantity, and time if he is to succeed in making a satisfactory profit. Different poultrymen make varying choices so there are many variations. Recent Poul- try Management Studies records show actual inputs and costs. From all these data, we have prepared a sample of in- puts and costs for use as a guide in enter- ing the business of producing eggs. It can also serve established producers as a basis of analyzing and comparing their operations to see if they can improve their profits. Table 5 presents in summary form a budget or schedule of inputs, expenses, and possible income with assumed prices as they look probable for the near future. These assumptions may not fit any par- ticular time and place so should be re- calculated using more applicable ones to fit the particular farm and current prices. A high level of efficiency and good man- agement are assumed — not so good as some but attainable even by new poultry- men who follow the best practices under the guidance of competent advisors. The sale of 19 dozen eggs per hen (228) should be attainable from the good re- placement stock available under good management and disease control. No in- ventory change for stock on hand is as- sumed although in an actual business there would usually be a small increase or decrease in a year's time. Feed Costs There are several ways of feeding chickens. Many poultrymen give an all- mash feed formulated to contain all the needed nutrients and minerals. This can reduce labor particularly where mechan- ical feeders are used. Some operators feed a higher protein laying-mash with about the same quantity of whole grains, such as milo or barley. Grain, which carries no charge for milling, is cheaper than mash and where purchased in quan- tity when prices are seasonally low after harvest, offers a considerable opportu- nity for a cost saving. We show that system in table 5. If all mash is used, figure the same total quantity of feed (125 pounds) at the local price of the selected brands. Inexperienced operators often find the simplicity and labor saving of all mash or crumbles an advantage. Pullet Chicks As explained above, about one chick is brooded per average hen. The breed- ing of this chick is important. Pullet chicks of a strain that has shown up well in the Random Sample Egg Laying Con- test at Modesto are usually purchased and may cost from 40^ to 55^ apiece. Miscellaneous Costs Included here are miscellaneous costs such as medicines, vaccines, electricity, brooder fuel, water, repairs, and small equipment, property taxes, insurance, and automobile used for the business. This item has varied considerably on dif- ferent farms — from 40^ to 75c\ We show 50^ as probably ample. Depreciation This figure was based on the invest- ment in table 5. This 22^ a hen is below current study averages because of the economical facilities assumed and the sixteen-year life assumed for the laying houses instead of the ten-year life fre- quently used for income tax purposes with cage houses. [H] Table 5. Typical Inputs, Costs, Income, and Earnings for an Egg Enterprise of 4,000 Hens Quantity Unit price Value Item Total 4,000 hens Per hen Total Per hen Per doz. Inputs and costs : Mash, laying and chick, lbs. . Grain 252,000 228,000 63 57 $3.80 2.80 $ 9,576 6,384 $2.39 1.60 12.70 8.3 Subtotal mash and grain . . Grit and shell 480,000 20,000 120 5 $ 1.00 $ 15,960 200 $3.99 .05 21.00 .3 Total feed and feed cost .... Pullet chicks purchased Miscellaneous costs Depreciation Hired labor, occasional help 500,000 4,000 400 125 1 0.1 $ .45 1.50 $ 16,160 1,800 2,000 890 600 $4.04 .45 .50 .22 .15 21.30 2.4 2.6 1.2 .8 Total cash and deprec. costs Operator's and family labor . Interest on investment at 6% 3,600 0.9 1.50 $ 21,450 5,400 1,200 $5.36 1.35 .30 28.30 7.1 1.6 Total all costs 3,200 240 0.8 .30 .50 $ 28,050 960 120 7.01 .24 .03 37.00 Less income not egg : Cull hens 1.3 Manure, cu. yds. . .2 Net cost of eggs 760,000 19 .36 $ 26,970 27,360 $6.74 6.84 35.50 Sample income from eggs, doz. 36.0 Management income Farm income $ 390 6,990 $ .10 1.75 .50 9.2 Labor A working operator with some help from his wife could do all the work re- quired for the 4,000 hen flock with the facilities assumed. But he will usually need some help at times in cleaning houses or in replacing himself when sick or on vacation. We therefore figured he would hire about 400 hours a year, at $1.50 per hour. The operator and his family would perform the other 3,600 hours of labor needed and would have to be efficient to do that. Neither egg grad- ing nor cleaning is assumed, although this is done on many egg farms, depend- ing on the marketing channel. Interest on Investment This is a proper part of the cost of production of any commodity. It repre- sents the wage for the capital invested whether it be furnished by the operator or borrowed at a cost of interest. For the operator out of debt it becomes part of his farm income. Six per cent, the cur- rent rate on long-term loans, was used in table 5. [15 1 Net Cost of Eggs This figure is arrived at by deducting the amount received from sale of cull hens and manure. It is shown so you can figure profit from egg income at different prices per dozen. Cull hens vary some- what in price. They have not brought much recently, with the availability of fryers at such low prices. Management Income This is the amount by which income exceeds all costs. It is the income to the operator for his management in addition to the value of his labor and interest on his investment. Farm Income The amount by which income exceeds cash costs and depreciation is called farm income. It is the total amount the oper- ator makes from his business for his management, labor, and all invested capital. The operator paying interest on borrowed capital would have his farm income reduced by that amount. Under the prices and costs in table 5, net farm income comes to $1.76 per hen with eggs at 36/ a dozen. A 38^ egg price would have resulted in $2.14; and with a 30^ price, farm income would be only 62^ per hen. As prices and costs change you can refigure the sample budget in table 5. Getting started in the egg business Buy, Rent, or Build There are some advantages in building up a new poultry plant on new land. More modern materials and design, a new clean location of your choice and the opportunity to do some of the con- struction yourself, all favor a new place. But it will take more time and probably cost more than the purchase of an exist- ing idle plant that can be cleaned and put into operation more quickly. The suitability of existing buildings on an old place and their condition should be carefully studied. If they have been idle for some time and are carefully cleaned before being used, the carryover of dis- eases and parasites can be minimized. The development period of several months before production can result in net income must be provided for under any method, as well as the probability that new construction or even rehabili- tation of an old place will cost more than anticipated. One common misconception should be avoided, namely, that people with limited capital can start on a small scale and make enough to support themselves and expand their operations. It takes a busi- ness of considerable size to yield any profit; considerably greater size to make a living; and still larger to provide the surplus for additional capital outlay. Where a limited beginning has worked out successfully, one member of the family has had income from off-farm employment. Renting Some poultry farms are rented. This may occur when an owner of an idle poultry farm may not be able to find a buyer or may not want to sell. A renter does not have enough capital to buy the farm. Rent is usually paid in cash monthly, with the tenant furnishing the stock and such equipment as is needed. Where part of his income must be paid as rent, the tenant must either live on less or have a larger business. A fair rental of a poultry farm should cover the owner's costs of taxes, insurance, re- [16] pairs, depreciation, and interest on his current investment. The example shown in table 5, includ- ing the dwelling, has an average value of $18,400 without the birds and feed. The landlord's annual costs would be about as follows: interest on investment at 6 per cent $1,104, depreciation $1,290, property taxes perhaps $450, insurance on buildings $60 and repairs $300 for a total of $3,204 or about $270 a month. This includes the dwelling which is paid for from the poultryman's net income. The dwelling might be worth $65 a month, thus leaving $2,420 for the rental of the egg facilities or 60^ per hen ca- pacity. A renter paying $2,420 for the poultry facilities would not have some of the ownership costs in table 5. If he had the same other costs and income, his farm income would be about $1.56 per hen or a total of $6,240. This less dwell- ing rent of $780 would leave him $5,460 for living and other uses. But rent is usu- ally a matter of bargaining, with levels determined by competition in the market between landlords and tenants. In many cases a rental is partly within a family, such as from a previous generation to a son, and probably under more favorable conditions than the above. The tenant in the above case, if start- ing with chicks, would need enough capital to clean up and repair the place, raise 4,000 layers to 6 months of age and pay rent and live for 6 to 10 months until net income begins, perhaps $10,000 to $15,000. Brooding facilities would per- mit starting the first 1,000 chicks at once and additional broods as fast as they could follow. But it would probably be 10 months before there would be enough income to pay costs. Some time could be saved by buying started pullets if good ones free of disease were obtainable at the right price. Integration Recently much has been said about integration or contract farming, which [17 is said to account for 80 per cent or more of the fryer and broiler production in the country. Integration is where two or more stages of the production and mar- keting process are brought under a single management or control. A feed dealer financing and supervising the grower is a partial integration. A company or co- operative supplying chicks from its own hatchery, feed from its mill, and also furnishing finances and advisory service and handling the product, fryers or eggs, from farm to market, all under a con- tract, would be a several-stage integra- tion. In order to get a large and depend- able volume of business in feed or eggs of the desired specifications, dealers contract with producers whom they fur- nish supervision and perhaps some of the inputs or capital. This is not widespread in California yet, but may grow and offer some opportunities to men who want to get into the business or to enlarge their operations with someone else furnishing guidance and much of the capital. Such an arrangement could range all the way from a beneficial one where the inte- grator and producer shared fairly the profits from their combined operations, down to where the producer made sub- standard wages for his labor and little or nothing on his investment. Investigate this type of farming carefully. An outside contribution of capital or inputs and sharing of risk can be helpful. A budget test showing what each party contributes can also show whether the proposed sharing of profits and risk is fair. This procedure is suggested further- more in any kind of renting or joint operation where one party furnishes the capital and another the labor. It now appears that for such integrated deals or contractual arrangements to be success- ful in the long run, they must be large scale with the best of management in all steps of the production and market process. ] Egg Marketing Obtaining a good outlet and price for eggs is vitally important in modern com- mercial poultry farming. Egg handling from the nest to the consumer is under- going many changes. Consumers now buy eggs of the highest quality and mostly from large food markets or chains. To meet the requirements of such markets, egg dealers and cooperatives must have a large and dependable supply of eggs of the desired quality. Egg pro- ducers must therefore meet the require- ments of their dealers. They begin by having a good young laying flock that can produce the best of eggs. They man- age to produce them clean, gather them often and cool, pack, and hold them for pick-up according to buyer specifica- tions. If artificial cooling or refrigeration is not yet in all instances required, it soon will be. Commercial egg producers now concentrate on production and sel- dom do any retailing through their own roadside stands or retail routes. Most of them sell their eggs under a verbal or written agreement to a dealer or deliver under a contract to a cooperative. Start with Chicks To avoid diseases and parasites for a while, it is advisable to bring only day- old chicks to a clean new poultry farm. Starting this way may take a little longer but will not cost much more since the poultryman with his own labor and facil- ities should be able to raise pullets cheaper than he can buy them. By doing some of his own construction on a new place, he can start his first brood as soon as the brooder house is ready and then follow with other buildings as needed. The business of raising started pullets for other poultrymen, however, is on the increase. In some cases it might be better for the inexperienced beginner to buy good started pullets already immunized against the several prevalent diseases. After filling his laying houses the first time, net income should begin and he can then attack the many problems of brooding and raising his replacements. Obtaining Experience and Skill The new poultryman no doubt will have studied available literature for some time while making his decision. He might well consider working for wages on a successful poultry farm before going into business for himself. He would find out if he really likes the work. He will learn much by doing and observing. A few poultry hands are employed in any poul- try district and even an inexperienced man eager to learn might be given that opportunity. When to Start The prospective poultryman might do best if he could start his business as a going concern at the end of a period of low egg prices and profits so that he would have a good year or two at the beginning. He could buy or rent a "go- ing" farm for less under distressed con- ditions and have a few months to get ready to sell eggs. But to foresee and be ready at the right time or have any choice with limited capital would be unusual. It is best to start when ready with enough capital to take unprofitable periods as they come. Time of year of starting the first brood or batch of pullets is unim- portant. Expenses start as soon as you take possession of a place so the impor- tant thing is to get up to capacity with layers as soon as possible. Credit Poultry farming with a considerable investment in birds of short and uncer- tain life and in single-use facilities can- not be financed largely on borrowed capital. Purchase or long-time mortgage credit is obtainable on the land and buildings, perhaps up to 65 per cent of the lender's appraised long-term value of the real estate. But this appraisal value [18] in many areas may be somewhat below current market values or the purchase price. For example, let us suppose the pur- chase price of the sample egg farm in table 5 was the original cost less the poul- try, feed, and small equipment, a total of $30,900. A lender's appraisal might be $25,000 on which he might lend the 65 per cent or $15,000 on a twenty-year amortized loan at 6 per cent. This would call for annual payments of $1,307.70. This loan is under half of the price so a purchase would call for a down payment of $15,900 plus other closing costs and title insurance — perhaps $16,500 in all. In addition, the buyer would need an- other $10,000 to $15,000 on which to stock the place with layers and to live until net income begins. Credit for rais- ing or purchasing pullets if available to the beginner would involve a high rate of repayment which would defer net in- come for some time. So, for all practical purposes, to safely get into the egg busi- ness on an independent ownership basis would take $29,000 for the 4,000-layer egg farm at the conservative investment assumed. Exception should be mentioned where an integrator may start someone with little capital. Credit for the established egg producer is more easily obtained. He has demon- strated his ability and has a considerable net worth or equity in his property. He may need credit in a period of low egg prices to buy chicks or feed. Or he may wish to increase the size of his business or even move to a new and larger loca- tion and build a new set of houses. Such credit is available and is being used at a benefit to both borrower and lender. SUCCESS FACTORS IN THE CHICKEN BUSINESS To be successful in chicken farming over the years requires a good start, with adequate capital on an adequate scale and good management thereafter. Egg [ production involves a higher proportion of cash costs than other kinds of farming. Production and price must be adequate to cover these costs. It is important to get disease-free chicks from breeder- hatcherymen who have a stock of su- perior production and viability. It may be necessary to order such chicks many months ahead to obtain them at the de- sired time. The poultryman's biggest expense item is for feed; hence, his greatest oppor- tunity to reduce costs and improve profits is in the wise buying of adequate, yet economical mashes and grains through the best channels and at the best time. Low mortality in chicks and hens and high production of eggs per hen are essential to profits. Positive sanitary and disease-control measures, such as vacci- nation, are necessary. Proper feeding and care are essential at all times. Some culling is essential in an egg-production flock. All these things call for technical information, skill, and industry. Good financial management — adequate record keeping and a balanced budget — is an aid to financial success and security. The University of California has pub- lished and has for sale at a nominal price, the California Poultry Farm Record Book. This provides for recording all personal and business incomes and ex- penses for the single-family poultry farm. It also contains production and other records needed for an analysis of the poultry enterprise as separate from other farm and personal affairs. It will provide per hen figures comparable with the sample budget in table 5 and to those published in the reports of the Poultry Management Studies currently con- ducted by the Agricultural Extension Service in 12 counties. Technical Advice and Information The Farm Advisor's office in each county is the place to go for sound prac- 19] tical advice, as well as printed informa- tion, on how to get started in the chicken business. The Agricultural Extension of- fice is the local office of the University of California cooperating with the U. S. Department of Agriculture. Situation reports and forecasts for egg, poultry, and feed prices are issued fre- quently by the Department of Agricul- ture, the California Crop and Livestock Reporting Service, and the College of Agriculture. These are usually available at the Agricultural Extension Service. A number of publications of the Uni- versity relate to the poultry business. These also can be obtained from the University of California Farm Advisor. He will also have or can order for you the California Poultry Farm Record Book mentioned above. Co-operative Extension work in Agriculture and Home Economics, College of Agriculture, University of California, and United States Department of Agriculture co-operating. Distributed in furtherance of the Acts of Congress of May 8, and June 30, 1914. George B. Alcorn, Director, California Agricultural Extension Service. 20w-ll,'59(A4891)MH [20]