Producers need to react to market changes
Flock depletion and feed management are key to sustaining industry profitability.
Jacques Klempf is a third-generation egg producer and distributor serving as chairperson of the American Egg Board. He is a past chairperson of the U.S. Poultry and Egg Association. Klempf's involvement with the industry dates back to his 8th birthday when he distributed jumbos purchased from his family business using a red wagon. Dixie Egg, his company founded in 1948, has approximately 2 million hens in Southern Georgia and distribution centers in Jacksonville, Fla.; Dothan, Ala.; and San Juan, Puerto Rico. Klempf contributes both time and creativity to our industry and his views are conditioned by his daily involvement with production and marketing of eggs and service on committees representing the interests of all industry stakeholders.
Egg Industry: How do you view the short term prospects of the U.S. egg industry?
Jacques Klempf: We have had a tremendous run over the past 14 months with exceptional prices despite the high price of feed. Prospects appear good over the short term if we can react appropriately to market conditions. The predicted increase in hens is obviously of concern although there are a lot of old hens that will be slaughtered.
EI: How do you view recent industry trends?
JK: There have been some big changes in our industry over the past two years. Acquisitions and consolidation which we have witnessed are probably a natural progression and in many respects mirror the process of a maturing industry which has also occurred in the broiler industry. This will enable us to react more quickly to market conditions. Fewer decision makers independently evaluating the marketplace and statistics will contribute to more rational decisions on expansion and location of facilities.
EI: Are there any recent trends which you feel are advantageous?
JK: The development of marketing cooperatives will be beneficial. This will encourage communication, assist with logistics, distribution of inventory and sales. With increasing costs of fuel, cooperation among producers for distribution and transport within regions is becoming more important. Moreover, the dynamics of the egg industry seem to have changed dramatically, and by that I mean with all of the increased costs like insurance, from health care to liability and workers comp, regulatory compliances on every front, animal welfare to human resources, not to mention the challenges of feed and energy. Today, more than ever, the administration and costs are very real and seem to have no boundaries.
EI: How is Dixie Eggs responding to cost escalation?
JK: Our biggest concern is the unprecedented increase in the cost of feed. The egg industry is not for the faint of heart. Addressing a seven-figure feed bill each month requires accurate budgeting and management of cash flow. As with other producers we are reviewing formulation of our diets on a regular basis. We are attempting to substitute locally available alternative grains for corn and we are using enzymes to reduce feed cost without sacrificing performance. This is especially important with our organic and non-confined flocks. The outstanding question for the industry is whether we can pass on costs to the consumer. So far we have been reluctant to do so on generic eggs, however other industries have managed to do this and we will be forced to follow as there are limits to cost containment.
EI: Do you foresee any future market opportunities for the industry?
JK: The U.S. Poultry and Egg Export Council is optimistic about increasing exports of processed egg products. About a third of our total production is now broken and half of this is from in-line units. An emerging problem concerns diversion of surplus broiler breeder eggs into the market. This however will be short lived as is it is a totally uneconomical measure. Broiler breeders will have to deplete flocks which are excess to requirements.