The real numbers: pasture-raised egg enterprise
When I first moved back from India in 2010 Mandy and I started two new enterprises on the ranch, pasture-raised eggs and broilers. We were convinced that if we wanted to be successful at this new ranching venture that we had to start an enterprise with a quick return on investment (ROI). I couldn’t think of anything more well suited to our environment in South Texas. It’s really hot and usually dry during the summer months. Spring and fall are beautiful and the winters are typically mild. The only kind of weather that adversely effects poultry is cold and wet, two things we don’t experience often. This can be overcome with good shelter design, but in our climate the birds can live and thrive outdoors all year long. In Northern climates the birds would require better winter shelter such as a hoop house with deep bedding. I have always considered laying hens a great enterprise to start for any new or transitioning farmer. Layers are relatively hardy little creatures and easy to manage. The hard part of a laying hen enterprise is selling the eggs. Almost every “mom and pop” farmer on the countryside sells eggs for $2-3 a dozen just because they have one too many chickens. It’s hard to compete with that mentality when your trying to scale and market pasture-raised eggs. Before we move on let’s not forget the hidden benefits of laying hens and that is their poop. Yes, I am talking about chicken poop the magical elixir to infertile land. Chickens bring a level of fertility to the landscape that other animals can not. They have been a vital component to the restoration of our soils fertility and that is something that is very hard to put a price tag on.
Before I go into the details of our pasture-raised egg enterprise I want to talk a little about selecting appropriate enterprises. Before you go about selecting new enterprises you should keep a few things in mind. 1) The most important factor to consider is that it takes time to develop the skills needed to perfect an enterprise. Depending on what enterprise you choose the learning curve can be really steep. It’s always best to have a diversified portfolio of enterprises so that if things don’t go as planned you have income from somewhere else to fall back on. 2) Don’t try to “reinvent the wheel.” It is easier to use an existing product or production practice than to invent a new one. 3) Make sure you have the time to dedicate to this new enterprise. Don’t overload yourself because there are only so many hours in the day. It will take time to manage this new enterprise effectively. Laying hens in particular will require your contact at least twice per day, morning and evening. The more frequently you contact an enterprise, the greater your chances of spotting problems before they get out of control. Additionally, the more time you spend with an enterprise the more likely you are to understand and innovate methods of improving it within your context. 4) Don’t start too many enterprises at once. This is especially applicable to beginning farmers. I can say that we made this mistake almost a decade ago. You will not have the financial resources to hire employees or other forms of help. If you start too many enterprises at once you will get stretched too thin and most likely destabilize the entire business. 5) Consider collaborating with other farmers. At Parker Creek Ranch we decided years ago that we couldn’t do it all so we went the route of contracting out enterprises to other farmers. It was the best decision we ever made and vastly improved the quality of our life.
Enough chatting about the pros and cons of laying hens or how to go about selecting enterprises. Let’s get to the real numbers. I’m all about scaling enterprises. It’s one of the factors that’s vital to profitability. We scaled our layer enterprise back in 2019 due to labor shortages around the ranch and an attempt to reduce overheads, which was successful. What we have achieved in the last year is optimal production for the labor that is available to the enterprise. We conducted a time/motion study in early 2019 for a period of 3 months. The layer enterprise amounted for about 11% of our total time contributed to the ranching business. Not bad for an enterprise that achieved a gross profit of 44.8%. Just remember folks that is the gross margin for the enterprise that contributes towards overhead, and possible overall profitability of the business. Before you accuse me of setting my prices too high remember that we made a profit of just 2% in 2019.
Our eggs sell through multiple avenues including retail price at the farmer’s market, wholesale in cartons to small grocers and wholesale in cases to restaurants. Our eggs retail direct-to-consumer for $6.00/dozen and directly to restaurants/wholesale for $52.50/case. Please remember that you might or might not be able to obtain these prices in your market. It’s all about developing a relationship with your customers, branding your product and being transparent about your production practices. In 2019 we rotated approximately 2000 hens (1500 in production with an additional 500 not in production) on about 30 acres of our ranch throughout the year.
Pasture-Raised Eggs Enterprise Analysis for 2019
Income:
$69635
Direct Expenses:
Feed $17591
Supplements/Medications $0
Contract Labor $2078
Livestock Guardian Dogs (LGDs) $779
Egg License $121
Egg Purchases (from contract producers) $9633
Packaging $2149
Equipment/Supplies $610
Seedstock (chicks) $1215
Brooding $253
Starter Feed $1106
Death Loss (@ $21/bird) $2541
Total Direct Expenses:
$38436
Gross Profit:
$31199 (44.8%)
or $19.21/hen
Gross Profit/Acre:
$1040/acre
Don’t let these numbers get you all excited! This of course doesn’t include depreciation of their houses, depreciation of the hens, a recoup of the investment when we sell them at 2 1/2 years old, and overheads of the operation (including labor). In order to get the egg prices we receive everything is sold via direct-market, which includes a whole other gamut of costs associated with that. Remember these are the numbers for our enterprise and what you might expect or achieve for yours can be very different. We have been in the egg business for ten years and it has taken time to build brand recognition. Unfortunately for most folks, the egg market is flooded with a myriad of small farmers trying to peddle 20 dozen eggs. If you live in one of these marketplaces then brand building will be an important strategy for your business. Many people gawk at the idea of hens because they consider them “time vampires.” Yes, they take time just like any other enterprise and are certainly not for everyone. The enterprise needs to be lean and efficient. Remember, it took us a better part of the last decade to get the kinks really worked out. Our pasture-egg enterprise isn’t perfect by any means. Some years have been better than others in regards to profitability, and 2019 was nothing short of a good year. There is a healthy profit to be made in layers if the market opportunity is present. Regardless of my warnings, I hope this gets you thinking about diversifying your operation.
Questions or comments please feel free to post below. You can also e-mail me directly at: mail@parkercreekranch.com. Thanks for reading!
