We are not trying to produce some elitist egg which only the wealthy can afford, nor intending to price-gouge anyone. Rather, we are trying to produce the healthiest eggs in the most ethical, sustainable fashion, at a fair price.
There’s a lot that goes into the cost of producing an egg, and since we’re at the point of business planning, to develop and grow our farm, I took the time to perform an “enterprise analysis” on each of the components of our farm, including our egg production from our flock of pastured, free-range, and organic-fed hens. Putting together an extensive tally of all the costs that go into producing our eggs yielded some surprising insights, and proves invaluable for understanding our profitability (or not…). For readers who are fellow farmers (even at the “backyard” scale), this might help inform your own pricing, while readers who are purchasers of eggs (of whatever type) might more fully understand all that goes into producing those eggs in that carton.
So here goes, full disclosure ahead!
The way I performed our analysis was first to add up all the costs that go into a single laying hen over its lifetime, which I set at 2.5 years. It takes about 5 to 6 months for a newly hatched chick to reach laying age, when it will then lay for about a year, take a break while molting, and then produce again for about a year (at a lessened rate) until molting again (at which point we would butcher the birds for stewing hens, because production levels subsequently drop further and the bird would no longer pay its keep).
First, the costs of the chicks. I figured about $3 per day-old, sexed chick, delivered to our farm. Of course, not all chicks make it through the brooding phase, so factor in a loss (say, 10%), and the per-chick cost is $3.33. That chick is also going to need some bedding, a heat source, a waterer, feeder, and of course a place to live. Once it reaches about 4 weeks, it can go outside to begin its pastured, “free-range” life – I say “free-range,” because our chickens are not completely free-range, and the reason for this is that we have foxes and coyotes and the like who happen to love chicken. So we raise them outside in portable electronet fencing. We set up a temporary paddock (if using one roll of fencing, we can get a 40′ x 40′ space, but we sometimes combine multiple rolls), and move the birds to new paddocks when they have done a good deal of pecking, scratching, and grazing, which is about once per week with our current numbers. They also have portable shelters. We raise the laying hens in the same manner, just in a different shelter (we’re currently using a gutted camper!) and separate paddocks. In the harsh winters, the birds have to come indoors, where they’re supplied with deep bedding).
Now, the costs of all that equipment gets both spread out across how many birds it can service (e.g. a waterer can serve 50 hens, while the brooder heater, since it is used for broilers, ducks, and turkeys throughout the summer, might serve 500 birds), as well as how many years it can be used. Added up, I estimated $3.60 going into the equipment and bedding costs of raising a laying hen from chick to “retirement.” There was also the $3.33 cost per chick, so we’re up to $6.93 – but haven’t yet touched the costs of feed.
Going by both what I’ve read on the matter, and what our own record-keeping affirms, it takes about 16 pounds of prepared feed (starter and grower) to raise a chicken to laying age. Afterward, a hen consumes 0.2 to 0.25 pounds of feed a day. Now, we do raise our birds outside on pasture, and we do see them scratching and pecking and grazing, so doesn’t that cut down on feed costs? I can’t say it does by much. For one, it takes energy for the birds to do that work; for another, grass is not easily digestible by poultry. They can acquire a wealth of vitamins and minerals and other healthy compounds from foraging, but not a whole lot of extra calories it seems. (I have read that pastures really high in legume content, such as clover and alfalfa, will provide much of the protein a chicken needs, allowing the grower to feed lower-protein, and thus cheaper, feeds, but our pastures are not at that point right now. Alternatively, really low densities – like 10 birds per acre, would be enough, but then you’d need a pretty extensive perimeter fence or good livestock guard dogs, and enough acreage for a profitable number of birds.)
So, for the two years where a chicken is laying, it will need about 180 pounds of feed, plus the 16 pounds bringing it into hen-hood. We feed certified-organic feed, and when we buy it by the pallet, this year were able to get it for about $23 a bag. The price for smaller quantities at the feed stores seemed to be about $24 to $26 per bag, so we were able to save a couple bucks there. Non-organic, conventional feed seemed to be in the $12 to $14 range, if I recall, so a bit more than half the price.
Now brace yourself. Remember our non-feed costs were $6.93 per bird? Well, the feed costs come out to $90 per bird! So feed costs around 1200% more than everything else combined. Put differently, even when you manage to save money on your equipment and chick costs (say, you throw together a $200 shelter instead of a $400 one), relative to feed those savings really aren’t much. Feed is the predominate expense, and would be the biggest place to save, if you can. We already buy it in bulk by the pallet load (1 ton), albeit still in bags. The next step would be having bins to purchase feed in bulk delivered by the grain truck, but of course those bins costs something too. But you also need to feed that feed quick enough, else you lost a lot of quality. Which means you need more birds, a larger scale, more land, more labor, all while maintaining the integrity of your sustainable practices…plus a large enough market to buy those eggs.
Other potential cost savings include purchasing whole grains and feed components (e.g. shell corn, whole barley, soybean meal, mineral mixes, etc) and grinding/cracking/soaking/sprouting your grains and making your own mix. Again, more storage needed, and probably a grinder of some sort, but you probably would have the freshest, highest-quality feed, and so may save some on the amounts needed. (Buying whole grains by the bag seems to be worse than buying milled feed by the bag – the few times we’ve purchased whole corn or “scratch,” it was pretty much the same cost as the milled feed!)
So the lifetime costs for one laying hen is about $97. Since we can consume the “retired” birds as stewing hens, some value is reclaimed there (a three-pound bird selling for however much per pound), but there is also a butchering cost, so the recovered value might only be $6 to $10.
Having considered the expenses, the next question concerns income, and that revolves around how many eggs are to be produced, and in turn the price at which they’ll be sold. While commercial layers may top 300 eggs per year, I don’t think our birds reach that, since we have standard breeds as well as hybrids, who aren’t cooped up in a cage with no room to move… I figure about 250 eggs in the first year, and 150 in the second, for a total of 400 eggs, or 33 and 1/3 dozen.
Now we can spread the lifetime costs of the hen over the number of eggs she’ll produce. Per dozen, the non-feed costs come out to just $0.21 per dozen. The feed costs, on the other hand, are $2.70 per dozen! Add in the costs of packaging (we do have to buy many cartons new) at about $0.35 per carton (and that was buying a year’s supply…), while subtracting the stewing hen credit, and we wind up with a per-dozen cost of $3.08 to produce for sale a healthy egg from our free-range, pastured hen.
Selling that dozen at $5 then, our profit margin on a retail dozen is a bit under $2 (and for our CSA-egg subscriptions, the margin is even less). Remember, no labor has yet been factored into our costs. For how many chickens? We currently keep about 50 layers at a time (half first-year and half second-year layers), along with the replacement set raised over the summer. So if we spread out the 400 eggs a chicken will lay over its total life (not just its productive life, but over the time it is growing and molting as well), which at 2.5 years is 900 days, for a little less than half of its days actually producing an egg, multiplied by 50 hens, we get on average a little under 2 dozen eggs a day. So our average profit per day is just $4. I’d like to say we average half an hour of work per day for all the laying chicken and egg related tasks, for a wage of $8 per hour, but that might be overly generous and optimistic… The pastured/free-range aspect of our production takes the most labor (moving birds, shelters, and fencing is time consuming), but that is the key to the nutrition and quality of pastured eggs.
If, for arguments sake, we increased our flock to 100 birds, doubling production, to bring in $8 per day, we probably would not spend twice the labor, so we’d have a better rate of return…but we’d also need more customers or outlets for those eggs, which might include wholesale, which might require grading (candling) each egg, which would be sold at a reduced cost, which would cut into the margins…you get the idea!
Supposing we fed conventional, non-organic feed, the feed costs per dozen, again, over the life of a chicken, would be around $1.45. With the same capital costs, that would be $1.66 per dozen. So this is probably the ballpark costs of the backyard flockster selling eggs (they probably get by with all reused cartons), though the smaller scale may allow more use of kitchen scraps, and more space for the hens to forage for bugs, worms, clover, and the like, so costs are reduced some. But selling, or buying, those eggs at just $2 or $2.50 per dozen is not providing much profit to the backyard chicken keeper, more of a supplement to their costs, for the fun of keeping chickens and supplying their family with healthy eggs.
Thus the price discrepancy with mass-produced supermarket eggs. When someone’s raising thousands of laying hens, their capital costs might not be any less than ours (indeed, it might be more), but the sheer volume of feed purchased is going to reduce their feed costs substantially, and probably their labor per bird or egg will be less as well, through more automation. If an egg is an egg is an egg, there’s really no reason NOT to purchase those $2 per dozen eggs. We’re pretty sure, though, that our pastured eggs are healthier and produced in a more ethical fashion. By the way, certified-organic eggs in the grocery stores seem to be about $5 per dozen as well, but that doesn’t mean they were pastured or free-range…
So there you have it – our small farm “egg-onomics.”
Oops, I was reading the wrong column on our enterprise budget. A break even cost of $4.80/dozen would have been the case if the hens were completely free range (assuming they all went home at night and actually laid in the nest boxes, neither of which did we find to be true).
Counting the labor in futzing around with electronet, our break-even jumped up to $5.30/doz. That’s with feed costing 12c less per pound than organic. So with organic feed, and all our other costs considered, our break-even would be $5.78, and we’d have to sell eggs for $7 to get a 20% net!
(Yes, you need at least that much net, because you still have to cover overhead — insurance, office time, truck repairs, etc.)
If we didn’t have so much predator pressure, doubling our hen replacement costs, we could sell our local-grain-sourced-but-not-organic eggs for $6 and do all right. We are out in the wilderness a bit, which doesn’t help on the predator end.
It’s not impossible, but eggs didn’t work for us.
Nice article, thank you. There are some other factors which change the numbers. When we started including this stuff it really clarified our enterprise analysis and we dropped the egg business.
We were, at the time, keeping 225 commercial egg layer hens (they really do lay more), buying bulk non-GMO locally sourced grain at about $0.35/lb, and selling the hens after two productive years for $3 a pound at the Farmers Market as “stew hens.” It cost $5 per hen to process them and most came back at 2 to 3 pounds, so we didn’t recoup much. At that scale, paying $10 an hour for labor, our break even came out at $4.80 a dozen, not counting marketing costs. Our pasture process sounds very much like yours.
1) Paying your self $8 an hour is too little. We use $10 and it is still too little. $12 would be more reasonable. There are hidden costs in wages, especially if you have employees, so $10/hr actually comes out to minimum wage.
Even with 225 hens, at $10/hr, our labor costs were ALMOST AS MUCH AS FEED –$30 per hen per year. The two most time consuming parts were moving electronet and washing and packing eggs. So that’s huge. Don’t discount labor!
2) Don’t forget property taxes, mortgage payments, or rental/lease costs for the property. We count taxes at $50/acre, and also land care costs, like lime and a yearly mowing, at another $50/acre.
3) Don’t forget marketing costs! Delivery and invoicing for wholesale, including gas and time, or fees, driving, and labor for farmer’s markets, which comes to $100 – $150 per market.
4) One of our big costs, even with electronet, was predators. Hawks do not care about electronet, and our pastures have trees for them to comfortably roost in. For a while in there, we were losing 2-3 hens a week! That adds up fast. We also had losses from diseases like chronic pneumonia, especially in the winter, which was hard to kick once it got on the farm. So counting these deaths, our replacement costs for hens was significantly increased.
5) Speaking of replacement costs, it comes out better for us to buy well-started pullets than to try to raise them ourselves, and to run an All-In, All-Out set up for disease control, than to have flocks of mixed ages.
6) Make sure you have a year round market at full price for as many eggs as you produce. We had no trouble moving eggs retail during the farmer’s market season, but in the winter, we got stuck with wholesale at $3.75/doz, and that didn’t work at all.
Again, thanks for a good article which affirmed our experience. I wonder if five hundred hens would create a different return. Would need a completely different market.
What had us ditching the egg enterprise were Labor and Losses.
Discounting labor has you working for nothing- none, zip, nada, this is depressing and for us unacceptable. The words “loss leader” are not good. I know I am worth a living wage. We spent hours every day on those hens in the pasture, feeding, watering, moving fencing, herding them in at night, collecting eggs, washing eggs, sorting eggs, packaging eggs, keeping a separate fridge for storage, marketing them, raising replacements, …..
Losses. I see a 10% loss in the beginning as chicks but what about later on? We had hens for 10 years with excellent net fencing and housing for the 4 seasons in the Northeast. We always had losses. Hens die, sometimes for no obvious reason. Illness and disease happen no matter how excellent your operation. Let’s not forget predator strikes- yup those happen no matter how great your fencing or housing is. 1 little slip up and there goes half your flock. Eggs disappear when you get a rogue egg eater. Egg production goes down with weather extremes which happen often and all year round.
Sales were great all summer and not so bad going into fall. I found myself spending more time to market them- time is not free!. By January sales dip big time while costs seemed to go up. Hens ate more and needed more bedding in their housing since weather outside was dismal they didn’t want to go out much.
I resorted to trying a wholesale account but each and every one would only pay below my cost of production. Losses. There are so many backyard producers who say things like ” I don’t need the money I have a real job that pays the bills”. Sigh……..
We tried lots of creative ways to keep eggs sales going into winter with no success.
We dropped the egg enterprise, we stopped the losses, we now had 3 hours extra per day (or more) to use on money making enterprises- or just plain old family time which is much better all around. Heck with all that extra time we did some amazing things that were profitable and got us our dream farm.
Josh- it’s great you are trying to break down the numbers. Don’t forget to factor in both labor and overhead (mortgage/lease, insurance, licenses, marketing expenses, phone, internet, etch). So your break-even price is probably closer to $4.50/dz in which case $5 does not give you much profit. You may need to charge $5.50 or $6 to make a decent margin. I wrote about this issue on my blog just a few months back at http://www.honestmeat.com. Keep up the writing!
Thanks for pointing this out, Rebecca. I was aware I had not included overhead, part of the reason being the discrepancy between where we are now, financially, with our farming, and where we project to be in the future, when all our “enterprises” are up and running. At that point, apportioning the percentage of our total overhead (insurance, utilities, rent, market costs, etc) to our egg production component would indeed add a little over a dollar per dozen to our costs.
Thank You!!! We raised over 200 hens, housed them on pasture, fed them and counted eggs everyday– the numbers did not add up for us either. It is very hot down here (South Louisiana) and we are almost convinced a hen will not lay enough eggs through the summer to make it worth keeping them for profit. Fertilizer value is one thing that keeps making us revisit the idea, but for now we are happy with our 20 older hens giving us enough eggs for us and family/friends.
Great Article, Thanks!
Up here in the Adirondacks, the summers are no problem, its the sub-zero wintertime that can hurt us!
Related to lapses-in-laying, since first analyzing our numbers, I revisited the idea, and the costs, or raising our layers through only one year of lay, rather than two (with its associated period of molting and subsequent reduced production volume). Surprisingly, it actually pencils out better to butcher our birds at 1.5 years old, rather than 2.5, providing we can get a good enough price selling “stewing” hens (which we can at the moment/scale).
Great article! It’s nice to see that someone else has thought through the numbers enough to charge more than just the cost of feed! I’ve seen so many farmers go out of business, complaining that they couldn’t make it work for $3/dozen, but they refused to make the effort to educate their customers about the difference in quality and sustainability of their business compared to conventional. And even $5/dozen is still stinking cheap! How many people can you feed with that? 3-6? Try feeding that many people at McD’s for that amount!
Great article Josh! A real resource for folks starting out, or for an occasional audit of an established model.
After 20 years of raising pastured layers, I’ve got three basic truths: 1) it is a labor of love, in order to create a superior product, 2) it’s a collaborative component of soil building and fertility enhancement for our truly sustainable livestock, ie sheep and cattle, and 3) the economy of scale on layers starts at about 400 birds and peaks up around 1200.
I think your “three basic truths” are pretty on-the-mark, Forest. We might include in the “labor of love” category the role of (potentially low-profit) pastured eggs as a bit of a loss-leader for the diversified market farmer, just as it is for supermarkets. We’ve found that eggs are one of the things customers at our farmers’ markets are most interested in, and having those eggs available brings people to our stand (and then once customers try them, it keeps bringing them back!). Plus, eggs offer an entry-level price point – a new customer may be willing to spend $5-$6 for a dozen eggs, but its a much harder sell for a $20+ chicken, for instance.
As for the fertility value, we can affix a bit of a price to that as well, though it doesn’t really encompass everything the chickens do and add. From what I’ve read, a chicken will put out in manure 100% to 115% of what they put in. So a 1.5 year old hen may have consumed around 100lbs of feed, producing the same in fresh manure (1/20th of a ton). You can then compare the N-P-K values of that manure to what could be purchased as equivalent fertilizer. For some of the figures I’ve seen, it might range from $25 to $40 per ton, so one laying hen might thus offer $1.25 to $2 in manure. But she also (when outside) spreads that manure herself, as well as that of any ruminant she joins, as well as removing thatch and reducing fly and parasite numbers – all told, harder to measure!