Mississippi poultry growers and processors have seen negative impacts from heat that began earlier than normal in the season, but higher production costs apparently haven`t yet been passed on to the consumer.
“The month of June was much worse than a normal June would be. The heat began much earlier than it normally does,” said Mike Cockrell, chief financial officer for Sanderson Farms in Laurel. “During July and August, you expect higher mortality due to the heat. What was unusual this year is that the heat began earlier than normal, and is lasting longer than normal. Of course, we always expect August to be hot and expect more than normal mortality.”
Cockrell said heat losses affect contract growers and processors differently. Growers are paid on a per pound basis on the live weight delivered to the processing plant. In extreme heat, chickens do not convert feed to meat as efficiently as under normal growing conditions. This reduces profits for growers and also results in higher processing costs.
“Because the bird is smaller, it makes it more difficult to process the live weights that meet our customer`s needs,” Cockrell said. “So it costs us money as well. There are the same labor and packaging costs for smaller chickens, so you have a higher cost per pound for processing. In any industry where margins are as slim as ours, every pound counts.”
The smaller chicken products that have resulted from the heat have made if difficult for processors to deliver what is needed for fast food operators, grocery stores, restaurants and institutional markets. Cockrell said that has created a tight market that has resulted in customers being willing to pay a premium for product that meets their need.
Although costs for wholesale buyers have increased, the costs apparently haven`t yet been passed on to consumers. And the wholesale price increase is temporarily. Once the heat ends, the market is expected to get back to normal.
Jack Rogers, director of corporate services for B.C. Rogers Poultry Inc. headquartered in Scott County, said current losses from heat this summer for Rogers Poultry are about 276,000 chickens. Other state chicken companies have had proportionately similar losses.
“We seem to have experienced typical late July and August type weather as early as June when we experienced 100-degree temperatures and high humidity here in Scott County,” Rogers said. “However, recently there seems to have been a slackening of the heat back to the normal levels.”
Beating the heat
Rogers said for decades producers and growers have been attempting to minimize the negative effects of Mississippi`s typical hot and humid summer weather on chickens. Various techniques and types of equipment help minimize the heat stress. Those techniques include feeding chickens at night instead of in the heat of the day, keeping fresh cool water available at all times, and building houses to run east-west to avoid direct sunlight from shining into the north and south facing openings of the houses.
Well running-clean high velocity fans, foggers which spray a fine mist of water on the birds, and evaporative cooling also minimize losses. Cool Cell housing can lower temperatures 5 to 15 degrees F. And “chicken Gatorade,” a potassium or electrolyte supplement added to the water, also helps chickens deal with the heat and humidity.
Rogers said that to prepare for the inevitable heat stress, most companies decrease the number of chickens placed in a chicken house. Less density means less heat generation by the birds, and more fresh oxygen to breathe.
Who`s buying the birds?
As anyone involved in food commodities knows, growing the crop is only one part of a successful operation. Marketing is also a challenge. And in the global economy, export markets are an important factor. In Mississippi about 18% to 20% of broiler chicken production is exported with Russia being by far the largest market.
Bob Anthony, chairman of American Poultry International LTD based in Jackson, said that 20 years ago only 2% to 3% of broiler chickens were exported. He attributes the increase in exports to more effort being expended to reach foreign markets, an improved ability to transport the product to foreign markets, and better communication with foreign buyers.
Anthony recently returned from a three-week trip to Russia where he participated in seminars sponsored in cooperation with the USA Poultry and Egg Export Council and Russian officials. Anthony was a spokesman for the poultry industry, explaining how the industry works in the U.S. by discussing quality control and other issues that interest buyers.
Russia has been affected by the downturn in the Asian financial markets and low oil prices, leading to concern about how Mississippi poultry exports might be impacted.
“Basically there was significant concern about financial ability of Russia until the IMF (International Monetary Fund) approved their loan, and then there were some additional loans approved for Russia,” Anthony said. “With those loans being in effect and available, there seems to be a growing sense of stability in the financial community over there, a feeling the financial institutions will be able to continue to hold the ruble value and work out from under their financial clouds.
“It is felt these clouds created over the financial community in Russia were triggered by the Asian situation and low oil prices. Oil is their largest item for export and with oil prices so low, that has certainly hurt. They have made substantial changes in their tax program and that sort of thing as required by the IMF. With that they feel fairly comfortable they will be able to maintain and gain some stability over the next year or so.”
Anthony said he anticipates the poultry export market to Russia will continue to be strong for at least another year although it is difficult to predict what will happen in the long term.
Mississippi exports more poultry to Russia than any other state, and Russia is the largest foreign buyer of Mississippi chicken. Other important foreign markets for Mississippi poultry products include Hong Kong, Japan, Singapore, China, Canada, Mexico and the Caribbean.
Because of problems in the Asian market, poultry exports to Asia are down about 30% from a year ago. But Anthony expects conditions to improve because Japan has agreed to take measures that are needed to stabilize the market.
“We are looking forward to the financial situation correcting itself, and being reflected in improvements in importing of chickens,” Anthony said. “The whole thing hinges on how Japan deals with the problems it has. I believe the Asian markets in general will go the way Japan goes.”
Despite the current economic problems, Anthony believes the Pacific Rim area is the section of the world to watch for growth in the next 20 to 30 years.
“They have good standards and work ethics,” he said. “Those people in Asia are very productive. Look at what Japan has done. Look at what Korea has done. They will produce, and if they produce goods, they will come back. The ability of IMF and World Bank to help those who get in trouble also is a big factor. Get rid of the political thieves, and let the economy work. That is all that is needed.”