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Will state turn the corner this year?

Poultry producers pin hopes for profitability on exports

Poultry producers in Mississippi are cautiously optimistic that conditions will improve this year, and are pinning hopes for turning the corner on profitability on increased exports.

“We hope to see better prices and improved exports,” said Tommy Elliott, corporate comptroller for Peco Foods Inc., which operates the subsidiary Peco Foods of Mississippi in Sebastopol. “It is still depressed. We are looking for it to turn around in April. We hope from April on it will show some improvement.”

Mike McAlpin, president of the Mississippi Poultry Association, said the brightest hope on the horizon is exports.

“We feel like we are going to turn the corner this year on exports,” McAlpin said. “Our exports were up 13% last year, and we’re hoping to get into the 20s this year. We see some opportunities that we haven’t had in the past with the disease problems they are having in the European Union (EU).”

Because of concerns about mad cow disease and problems with foot and mouth disease, beef and lamb consumption in the EU is down. As a result, Europeans are eating more chicken. Hence exports of chicken from France and Great Britain are expected to be down because domestic consumption is increasing.

If U.S. chicken exports improve, and grain prices remain relatively stable, McAlpin said poultry producers may finally be making a little money after two years of losses.

“No one is talking about making big money in the poultry business this year,” McAlpin said. “But for first time since the Russian exports were cut three years ago we are looking at the possibility of getting into the black. The Russian market is starting to come back, but not as gangbusters as it once was. We have found other places we can place product. With the European Union not as dominant in exports, we think that is going to be a shining point for us.

“If the Midwest corn crop comes in like predicted, and other grains used in feeds remain stable, there is some good hope when we go to the bank this year we will be putting some in as opposed to drawing money out like we have in the past two years.”

Growth in production is projected at 2% this year, a rate equal to last year but slower than the growth rate seen in the mid- 1990s. So while there will be more product on the market, the increase will be less than seen previously.

Another possible favorable factor is the USDA projecting there will be less beef produced this year, which makes way for more poultry products on the dining table in the U.S.

Poultry producers were affected a great deal by the cold weather this past winter. Abnormally cold temperatures required more heating of chicken houses, and spiraling natural gas prices made that an expensive proposition.

“The thing that has affected all of us in the poultry producing states since November is this ominous thing that came upon us called winter, which we really haven’t seen in 12 to 15 years in poultry-producing states like we saw this year,” McAlpin said. “That and the rise in natural gas prices at the same time was a killer at the farm to the independent poultry growers out there because they were having to keep chickens warm to keep them alive, and prices for fuel were doubling and sometimes tripling. That also translates into price increases at the processing level because we are using electricity and natural gas to power our plants to process our chickens. So it was a double whammy where the cold winter and high fuel prices were hurting producers and processors alike.”

Growers are now hoping for a mild spring and summer, but McAlpin said drought and heat aren’t as big a problem in the industry as they once were. Much of the poultry housing is relatively new and incorporates new technologies such as cool cells and misters that help keep chickens cool.

“Heat is not nearly as big a problem as it once was,” he said. “But probably cold combined with fuel prices was a bigger problem than it ever has been.”

Egg producers have seen some improvement in prices in recent months and are expecting continued improvement, said Fred Adams, CEO of Cal-Maine Foods, Jackson, the largest egg producer and distributor in the U.S.

“We had very difficult years in 1999 and 2000 because of overproduction,” Adams said. “We were producing 2% or 3% more eggs than the demand, and as a result the egg prices reflected that oversupply and prices were below cost of production for 1999 and 2000 until about September. At that point because of the poor economics of the industry the two years previous, the supply of eggs got more in line with the demand, and we have had relatively good prices since September of 2000. Those better prices are continuing in 2001 and it appears the economics of the businesses are going to be much better in 2001.”

One important factor is that the demand for eggs is better than it has been for 10 years. That’s attributed to good publicity from scientific and medical community. Earlier recommendations about limiting egg consumption because of their cholesterol content have been countered by studies that show eggs are nutritious and a good value.

Adams said another favorable factor is increased exports. Even though egg exports represent only 2% or 3% of all eggs produced, exports are an important factor that improves the supply and demand balance.

Feed costs remain favorable with an abundance of corn and soybean meal on the market. But Adams said costs for packaging materials, labor and fuel affecting the cost of delivery of eggs have shown an increase in the past year.

Contact MBJ staff writer Becky Gillette at mullein@datasync.com or (228) 872-3457.

About Becky Gillette

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