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Econometric feeding can help egg producers find the best balance between a lower-cost, lower-protein layer ration and number of eggs produced, particularly during times of low egg prices. | Terrence O'Keefe
on June 21, 2016

Low protein feed, fewer eggs but better bottom line?

Could lower protein layer rations be the optimum choice for egg producers in times of excessive supply and low egg prices?

Prior to the mid 2000s low egg prices were common in the U.S., particularly during the summer months. For various reasons egg prices have remained high for the last several years with some hopefully thinking that prices would not return to more typical cyclic patterns. However, we now know that thinking was false. As soon as egg supply became greater than demand egg prices dropped. Now the questions are, how long will egg prices remain low, and what can producers do?

Since feed cost is the major production cost, the question most asked is, can I reduce my feed cost without reducing production? The answer has always been and still is no. If producers could do that, they would have been over-feeding. When hens are fed on target for optimal performance, any reduction in protein (amino acids) to reduce feed cost reduces performance. That is the reason so much effort has been devoted to requirements.

Formulating for maximum production

When determining the hen’s requirements for major nutrients, researchers determine how much performance dropped when hens were fed graded nutrient levels below the requirement. With that information, and using different egg and feed prices, producers determine if there are some egg price conditions in which the savings in feed cost would be greater than or equal to the value of the loss in production. If there were, it would allow lower protein levels to be fed, which would not only reduce losses but also reduce egg supply.

Understanding how requirements are determined can help producers better understand this concept. To determine requirements, graded protein levels are fed. The response of hens to increasing protein decreases until no response is observed, and that is where the requirement is set. When hens are fed low protein levels, production ceases, and the hens molt. When protein levels are increased from low levels, large increases in production occur, but when protein levels are increased from near optimal levels only small improvements in production occur. Our hypothesis starting in the mid 1980s and continuing until now was that under some conditions, it may not be economical to feed all the protein required to get the last bit of response.

Due to difficulty knowing the requirement, under- or over-feeding is common and can significantly influence returns several cents per dozen. That difference can be enough to influence survival time in a down market. However, the difference in efficiency between producers may not be near enough to increase returns from positive to negative in a down market. Therefore, the No.1 challenge producers have with low egg prices is to get prices up. The best way to do that is to reduce supply and/or increase demand. The question becomes, how can producers help reduce supply and increase demand in a timely manner?

Alternatives for reducing egg supply

In the past, the two ways most used to reduce egg supply were to molt and/or dispose of the hens early. However, that was often not enough, leaving a helpless feeling because all producers could do at that point was wait until supply decreased and/or demand increased.

I think a few people may believe some larger producers want egg prices to remain low longer in hopes of expanding. There may be some truth to producers wanting to expand, especially after long periods of high egg prices, but one cannot ignore the fact that the larger the producer the greater his losses, and with current low prices they could be racking up huge losses quickly. After a period of low prices, I think it is also true that producers are more likely to consider selling, creating buying opportunities. The more efficient producers have taken advantage of this.

Although molting and/or disposing of hens early helps control supply, there are many limitations. Producers still have to meet customer needs, and many producers may not be in a position to reduce egg production or be motivated to do so because short-term losses may increase. Therefore, the goal is to find additional ways that all, or at least more, producers will be motivated to cut back egg production.

Feeding reduced protein levels

My research has shown there may be some instances (influenced by egg price, spread in egg price due to egg size, feed price and spread in feed price due to cost of energy versus protein) when producers can feed reduced protein levels and the savings in feed cost be greater than the value of the eggs lost. Reducing egg numbers this way is different than molting or disposing of hens early, which increases short term losses due to fixed cost.

The real value of feeding less protein is not necessarily any reduction in losses but in the small but significant reduction in egg supply. Even more important, once producers understand when feeding less protein becomes economical, more producers should be motivated, and the small reduction in supply for an individual producer could become a significant reduction for many producers. The challenge becomes getting producers access to tools that lets them know when feeding less protein becomes economical and learning how to do this in a controlled manner while continuing to meet customer needs.

Producers should not wait until the problem is pronounced; be proactive.

The point is, it makes little sense to feed for maximum production when there are excess eggs, particularly if there is even a slight possibility of reducing losses at the same time you can limit egg supply.

To me that is a no-brainer, but I could be wrong. The challenge for egg producers is knowing when feeding diets containing reduced protein levels becomes economical because low egg prices are just one of many factors that determine that.

There are many factors that can influence that, and those factors are continually changing. To help make the calculations, the Econometric Feeding & Management (EF&M) software program was developed in the early 1990s.

Many experiments have been conducted with the program, and it was continually improved to cover all aspects of feeding. The EF&M program was made available to all egg producers in 2006 because no one producer is large enough to solve this problem alone. It was designed to help producers better know the cost of over- and under-feeding as feed and egg prices change and highlights when feeding reduced protein levels becomes economical.

Feeding your hens this summer

Although the period of low egg prices occurring now may be longer than normal due to unusual cause(s), typical low egg price cycles have been fairly short, which hinders efforts to find ways to correct. Although a lot of hurt can come from low egg prices, once producers get through the low prices they are so relieved and busy they may be reluctant to start preparing for the next drop putting them in a cycle of trying nothing new. The point is, producers should not wait until the problem is pronounced; be proactive.

The more producers who independently take advantage of econometric feeding, the more effective the application of the concept becomes. However, regardless of what any other producer does, continually feeding for optimal profits or minimum losses is a goal all producers should have. Since all producers, including the very best, already over- or under-feed in some instances due to the many challenges in feeding correctly, under-feeding in a controlled manner should be no big deal — especially if it has the potential of reducing losses and supply at the same time in a down market.

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