Hatching new strategies

Profits: As costs rise and prices fall, Maryland farmers are experimenting with larger and smaller operations.

February 11, 2005|By Ted Shelsby | Ted Shelsby,SUN STAFF

With wholesale prices near a four-year low and costs rising, Maryland's producers of chicken eggs - who had enjoyed a boom during the high-protein diet craze of a few years ago - are struggling to stay profitable.

Some, such as Sunnyside Farms near Westminster and ISE America near Cecilton, are responding by expanding, to take advantage of economies of scale.

Others, such as Andy's Eggs, a tiny operation in Fallston, are cutting out the middleman and selling directly to the consumer.

"We got into direct marketing, and it has done very well for us," said Andy Bachman, 22, of Andy's Eggs. "People drive up to the house, knock on the door, and say, `Can we buy a dozen eggs?'"

Although a fraction of the size of the better-known broiler industry based on the Eastern Shore, the state's egg producers generate nearly $50 million a year in sales and provide vital jobs in an arc across the north-central portion of the state, from Frederick to Cecil counties.

"Our forecast for 2005 is that unless something happens to disrupt the supply, farmers will be losing 5 cents to 10 cents on every dozen they produce," said Gene W. Gregory, senior vice president of United Egg Producers, a farm cooperative and trade association based in Atlanta.

He said low egg prices are putting farmers in an economic squeeze and making it more difficult to compete - especially for the smaller operations.

The 60 cents-a-dozen wholesale price that Northeast farmers, including those in Maryland, were receiving for eggs last month was near a four-year low, said Gregory.

He warned that egg finances are not expected to improve much this year.

"It's the little guys who are disappearing," he said.

Maryland ranks 24th among the egg-producing states, with 2.96 million egg-producing hens in 2003, the latest information available. Cash receipts, or sales at the farm level, totaled $46.2 million that year, as state farmers produced 813 million eggs.

Three farms - Sunnyside, ISE America and Red Bird Egg Farm, a Bear, Del., company with an egg farm near Millington in Kent County - account for about 75 percent of egg production in Maryland, according to John Doerr, assistant dean at the University of Maryland's College of Agricultural and Natural Resources.

Gregory blamed the low prices on several factors, including farmer greed.

"This is a cyclical business," he said. "Egg farmers go through good times and bad times. The high-protein diet craze pushed up demand for eggs in 2003, and farmers got greedy.

"They made a lot of money in 2003 and the early part of last year, so farmers increased their flock size. They saw the chance to make even more.

"This is a supply-and-demand business, and when farmers exceeded the demand, prices dropped. That's how we got into this situation."

Like most agriculture commodities, egg prices vary from week to week. Despite these ups and downs, farmers are receiving less for their eggs today than in 1990, according to state Department of Agriculture statistics.

This has forced many farms to expand to survive. It forced others out of the wholesale business and into direct marketing. Others got out altogether.

Lippy Bros. Inc., one of the largest farm operations in the state, owns Sunnyside. It grows grain and snap beans on 10,000 acres in parts of Baltimore, Carroll and Harford counties, said Donald Lippy, one of the four brothers who started the business.

Lippy's buildings are fully automated and connected by more than 20 miles of conveyor belts that bring the eggs into the packinghouse, where machines fill red plastic flats every few seconds with 30 eggs.

Lippy is not one to complain much about low prices. "There are years when you lose money," he said. "There are years you break even, and there are times when you make money. It's that kind of a business.

"If prices would stay at 80 cents a dozen, this would be a pretty good business. You could make some money, but not get rich."

ISE America is the U.S. subsidiary of a Japanese company. It is also Maryland's largest egg producer: about 8 million eggs a week.

"That's a lot of breakfasts," said Gregg Clanton, an ISE vice president.

"It's an amazing operation," said William C. Manlove, a Cecil commissioner who represents the southern part of the county. "They have a conveyor belt that is 6 feet wide, and the eggs just keep rolling in. They get packed and shipped without ever being touched. You can't believe it.

"The big impact that they had on our area is that the price of grain jumped 10 to 20 cents a bushel when they came in. The grain farmers welcomed that."

The down side of the operation, according to Manlove: "They don't pay the best wages."

Gregory said that while "the big egg producers are getting bigger," there are still niche markets for smaller farms.

On smaller scale

Bachman, of Andy's Eggs, said he has found his niche.

He sells eggs from a flock of about 500 free-range chickens at his parents' farm on Harford Road, just outside Bel Air.

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