An Egg Economics Update

Numerous researchers have analyzed the economics of molting through the years. Obviously, the conclusions have varied with the economics of the time and the procedures used to evaluate the issue (Rice, et al, 1908; McClelland, 1946; Anonymous, 1964; Bell, 1966, 1967a, 1984a; Parlour and Halter, 1970; Andrews, 1973; Zeelen, 1975; Chen et al, 1982.

Will induced molting, as a regular part of a layer replacement program, increase economic returns over those from all-pullet programs? This question has been much debated since the practice of induced molting was first developed. In the research literature and popular trade-press articles, one can find as many supporters as opponents of induced molting from the economic viewpoint. Selected references are available from the author including extensive reviews by Parlour and Halter, 1970; Swanson and Bell, 1976; Wakeling, 1977; Wolford, 1984.

The diversity of opinions results from the use of different performance standards and price assumptions in reaching the respective conclusions. A number of factors influence the outcome of such an economic evaluation. Anyone undertaking the analysis must be aware of the effects each performance standard or price assumption will have.

Optimum replacement program selection is very dependent upon the economic conditions present for each farm and in various countries. Replacement policies should be fixed for 5 or more years at a time and are usually not changed from one flock to the next. The exception to this is with companies that have contract growers and the flexibility of changing the length of programs. Extended production periods have one principle objective - to reduce replacement costs. Therefore, the cost of 18 to 20 week-old replacements and the salvage value for the old hen at the completion of her laying period(s) are both extremely important in analyzing laying cycle length and whether or not a company should include one or more molts.

In some countries, a very high salvage value oftentimes offsets 50% or more of the cost of raising new replacement pullets. In such cases, molting rarely pays. On the other hand, if pullets are quite expensive and salvage values are very low, molting commonly pays.

High first cycle egg production rates compared to second cycle results will tend to favor all pullet flocks, especially under high egg price conditions. High feed prices, on the other hand, will favor the programs that use lesser amounts of feed.

For years, egg producers have basically followed the recommendation of the breeder to replace their flocks on an annual basis. In many cases this is the best advice. But, each egg producer has the responsibility to interpret this question for his own unique set of conditions. Many producers who now recycle their flocks should not be doing so and others who maintain all-pullet flocks should be recycling.

The methodology developed by the University of California in the mid 70's was to synthesize or model a typical flock for each egg producer based upon his own set of conditions and experience. This was facilitated with the use of a main frame computer and later modified to work with the small personal computers available today (Swanson and Bell, 1976)

Unique performance curves representing all important measures of performance and economic conditions are constructed. A specific replacement policy can be evaluated and compared with over 300 other options ranging from a 50 week sale to a 3 cycle program with cycles of 100, 50 and 50 weeks respectively. An additional feature allows the analysis to take place at three different egg and three different feed prices.

In order to compare programs of different lengths, the authors chose to use as their economic objective the concept of "maximum egg income over feed and pullet costs per unit of time per hen housed". This concept is essentially equivalent to "return on investment", the objective of being in the business. Now, two or more programs or differing lengths can be compared directly with meaningful economic consequences.

Historically, commercial egg producers have considered the all- pullet flock to be the optimum replacement program. High egg production is sustained, egg quality is maintained at relatively high levels, and feed conversion rates are low (pounds of feed per dozen eggs or kilos of feed per kilo of eggs). Attempts to keep flocks beyond 80 weeks of age without molting are usually less profitable and egg quality suffers.

Recycling (induced molting), when not misused, provides a means for recovering some of the performance efficiencies of the first cycle while at the same time reducing the cost of replacements (new ready-to-lay pullets). Egg producers in areas with high replacement costs can readily see the advantages of extending the life of flocks, but many have difficulty analyzing the off-setting advantages and disadvantages of programs of differing length.

Molting and recycling a flock calls for precise decisions:

New analytical procedures have been applied in recent years that emphasize maximum returns per unit of time per pullet housed. This approach, when analyzed by computer, can compare an endless number of program alternatives. When analysis is properly done, the net effect of various performance factors at different prices can be assessed allowing for the selection of an optimum replacement program.

Whether or not it pays to routinely recycle laying flocks depends on a number of factors. Most important is the relative performance of pullet and molted flocks and prices received for eggs and costs of feed and replacement pullets.

After an induced molt, egg production rates during the second cycle do not equal earlier (pre-molt) egg production. This fact, along with the reduced flock size caused by normal morality, would appear to rule out the use of recycling, but reductions in replacement costs usually offset the disadvantages. Therefore, the practice of recycling becomes one of cost analysis. Some of the factors involved are as follows:

1. Costs to bring the flock into production. It costs less to molt a flock and bring it back into egg production than it does to grow a new flock. This is a major cost difference in making the decision of whether to molt or not to molt. The higher the replacement pullet cost, the greater the incentive to recycle. Pullet costs amortized over the 25 dozen eggs produced in a one cycle program vs 35 dozen eggs in a two cycle program vs 42 dozen eggs in a three cycle program are listed in Table 1.

Table 1. Replacement Costs per Dozen Eggs Produced - One ,Two, and Three Cycles.

2. Length of egg production period. The profitable period of egg production is longer during the first cycle than during the second and successive cycles. Usually the second cycle lasts only 7 to 9 months. The most profitable two-cycle program is to molt birds at about 65-70 weeks of age and sell them 35-40 weeks later at 100-110 weeks. Decreasing egg shell quality and rate of egg production are the two most important determinants affecting the optimum length of a laying cycle.

4.  Egg size. Egg size is larger during the second cycle. This becomes an advantage only if there is a market for the larger eggs.

5.  Mortality comparison. The weekly rate of mortality is usually about the same during successive egg-production cycles, with the exception of the first ten weeks after the beginning of the molt. Mortality increases during the first three weeks following the initiation of the molt, but decreases over the next seven or more weeks to levels below corresponding pre-molt levels. Weekly averages for entire cycles are practically the same.

6. Feed consumption. Normally, daily feed consumption is practically the same in each cycle of production when measured from peak production to the end of the cycle. Feed consumption during the molting period is considerably less than during egg production as feed is usually removed during a portion of this time. Additional savings are achieved during the resting period as a lesser amount of less expensive feed is used.

7. Shell quality. The average quality of eggshells is much better during the first cycle than during the second. Although shell quality gradually deteriorates over the egg production cycle, molting (when initiated at 65 weeks of age) usually restores quality to the level of a 10-month-old pullet flock. Shell quality during the second cycle drops at about the same rate as in the first cycle, but because it starts at a lower level, it reaches the minimal acceptable level earlier.

8. Interior egg quality. During the second cycle, interior quality of eggs as measured by candling or break-out, is slightly poorer than during the first cycle. About 10% fewer Grade A eggs may be expected during the second cycle compared with a similar production period during the first cycle.

9. Costs and Prices The decision to incorporate molting into a routine replacement program must evaluate all of the performance characteristics previously discussed as well as many important economic factors.

Because of the complex interrelationships involved in this question, one cannot conclusively state that recycling is economically better or worse than an all-pullet program. With accurate performance and pricing information, and the use of a computer, the final answer can be determined for each set of conditions.

As a matter of economics, some producers prefer to regroup molted birds by consolidating houses or by filling vacant cages with birds from another flock. It should be noted, though, that such practices can introduce disease from one flock to another and can disrupt established social patterns within the flock, and may result in cannibalistic behavior.

Extended periods of lay beyond a normal two-cycle program can be analyzed in the same manner as previously discussed. Without adding hens to the flock and with even poorer rates of lay, extended programs are rarely cost efficient. At the normal age for a second molt, the flock is usually reduced to approximately 90% of its original size, and the rate of lay is rarely above 80%. Therefore, the overall lower rate of egg production usually makes these programs uneconomical, even though average egg quality can be superior to either the one- or two-cycle programs with proper control over the length of the laying period. Three-cycle production may prove to be economical under circumstances where larger eggs are priced at a substantial premium.

It's estimated that replacement programs that include molting result in at least 15% higher profit margins for the egg producer compared to all-pullet programs (1999). Model building computer software is available to construct typical 1,2, and 3 cycle flocks (Swanson and Bell, 1976). Such models are based upon individual owner experiences or can be developed from breeder standards. Although developed to determine optimum replacement policies, they can also be used to determine "what if" situations for different cost/price situations or for conditions unique to a particular region of the world.

An example of performance, cost, and income for a typical molt and non-molt program is shown in Table 2.

In this example, after exclusion of other costs, the annual income per hen housed from the molt program is estimated to be $1.32 compared to $1.15 for the one cycle non-molted program - an increase of 15% in profits. With lower egg prices or higher feed prices, even greater differences would exist. Molting is more justified under low margin conditions (low egg prices or high feed prices). In light of the $.21 per hen per year profit estimated for the past 21 years, the $.17 per hen attributed to replacement programs represents more than 80% of the annual profit. It is a major component of total income.

As one can see, molting is an important tool for optimizing profits in the egg industry. Much of the controversy about molting is not about the practice itself, but is directed at the methods used to molt a flock. Practically all methods require some degree of feed or nutrient restriction and this is not acceptable to many. There are methods which limit specific nutrients (calcium, sodium and protein) which are used in countries that do not allow feed withdrawal. Most of the research with these methods has not proven them to be as satisfactory compared to traditional feed removal methods (Bell, 1996b).

The elimination of induced molting in the egg industry would have far-reaching effects on egg producers, their suppliers and the general public. The US egg industry's cost and egg price conditions result in very narrow profit margins and the choice of replacement programs has a major impact on a farm's profitability. The $.17 per hen improvement in profits associated with molting is equivalent to $45 million for the US and $4.25 million for California.

Technology is usually adopted slowly and the total effect is spread over the entire industry over a several year period. This prevents massive over-night changes in egg supplies and resulting disruption of the egg market. From time to time, different developments have come along that have dramatically change the performance characteristics of the nation's flock and major changes in the industry's profitability have occurred. Examples of this include: major disease epidemics, large changes in feed prices, and significant changes in the performance characteristics of different strains of chickens. Eliminating a primary management technique (molting) arbitrarily, is an example of an extremely disruptive problem. It would result in: