Michigan egg producers monitor salmonella woes

August 31, 2010
| By Pete Daly |
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The salmonella problem bedeviling a couple of major Iowa egg producers apparently hasn’t ruffled any feathers among the eight commercial producers here in Michigan. No Michigan eggs have been subject to recall.

So far, the only impact felt here has been a spike in wholesale egg prices, but the head of Michigan’s largest egg-laying operation says even that probably won’t last long.

“I think it’s only temporary because at the moment, when you take a whole bunch of product off the shelf, there’s an immediate vacuum that has to be filled,” said Stephen Herbruck, CEO/president of Herbruck Poultry Ranch in Saranac, which markets about 1.6 billion eggs a year. He said last week that the wholesale price for a dozen eggs had jumped about 30 cents shortly after the recall of suspect eggs began in mid-August. About 550 million were recalled as of last week, none from production facilities in Michigan.

As to whether or not egg demand in general will drop due to consumer fears, Herbruck said it is “probably a little too early to know.”

The salmonella problem in Iowa is the result of human failure, said Herbruck. All egg producers “need an all-encompassing food safety quality assurance program in place, and we’ve been doing that for over 10 years, specifically on salmonella since it became a public issue back in the late 1990s,” he said.

Egg supply and demand “is reasonably well in balance right now. We think (the salmonella scare out west) might cause consumers to choose to use a few less eggs, so we think demand might drop off a little bit, but we don’t really see it as having much impact here in Michigan,” said George House, executive director of the Michigan Allied Poultry Industries Inc., a producers association.

Michigan egg producers “are not so big, by national standards, but are big relative to other livestock entities in Michigan, like hogs, beef and dairy,” said House. An MSU poultry expert said the two leading egg production states are Iowa and Ohio, in that order.

There are only eight commercial-sized producers in Michigan, said House. All but one are located in West Michigan. One is in the Thumb.

“Those eight producers have about 10 million laying hens,” he said.

Nationwide, the commercial laying flock numbers about 265 million birds, said House, and the top 50 to 70 egg producers control about 85 percent of production.

House said Michigan’s annual egg production probably has a total value of $110 million to $115 million, but “it’s actually growing — the bird numbers have been going up. Also, every year, you get a little bit more efficient than you were the year before.”

With 6 million birds of its own and marketing the eggs from another 1.5 million birds, Herbruck Poultry Ranch is far and away the largest egg producer in Michigan. The company has about 400 employees, according to Herbruck, whose partners include his three brothers and their sister.

Herbruck said the Michigan egg industry has been consolidating into fewer but larger operations for the past 20 years. “It’s a pretty specialized industry, a pretty small club at this time,” he said.

House said the industry requires “a very high investment to get in.”

Herbruck did not reveal Herbruck Poultry Ranch’s annual revenue, nor how much it has invested in facilities, but he described the investment as “a lot.”

“When you have bad times, you get what is called a test of capital,” said House, regarding the economics of commercial egg production. “That means, ‘Can I stay in business longer than you can?’ Who can withstand loss the longest?”

Darrin M. Karcher, who holds a doctorate degree and is a poultry extension specialist at Michigan State University, said he has been told that there were a couple hundred commercial egg producers in Michigan about 50 years ago.

“It became more vital that you become larger” in order to stay in business, he said, and egg production does seem to him to be a marginal enterprise driven by volume.

“You’re only talking a couple of cents here and there when you look at your profits,” he said. Even a half-cent increase in certain costs can be a major concern for the producers, he added, and by far the largest cost factor is feed, which is somewhere between 60 and 65 percent of the total operating cost.

“When you see huge swings in the grain market, you can guess that’s really influencing prices the consumer ultimately sees in the store,” said Karcher.

House said one of the factors in egg production is the size of the laying flocks. “If we get too many birds, then we’ve got overproduction and the bottom drops out.”

Today an increasing number of U.S. producers of eggs and meat are relying on exports to offset overproduction at home. House said exported eggs usually go to the Far East, and compared to other types of animal protein, travel very well. U.S. producers wash their eggs and apply a fine coat of mineral oil to slow down the movement of air through the shell, which keeps the egg fresh for a longer time.

If held at the right temperature and cared for properly, an egg can safely be kept much longer in storage than most people realize, said House — so much longer that many consumers wouldn’t feel comfortable eating it.

“One of the unique things about eggs in the U.S. is, we’re the only part of the world that actually refrigerates eggs. No other country in the world refrigerates eggs; they just leave them at room temperature,” he said.

Because American producers and retailers refrigerate eggs in shipment and storage, “that’s part of the reason that we have a very good egg supply here in the U.S. and can ship them all over.”

Egg professionals like Karcher, House and Herbruck are quick to point out that no other animal protein produced in the U.S. can compete with the low cost of the egg — which made egg production almost immune to the effects of the 2008-2009 recession.

“In terms of per serving of protein, (eggs) are the cheapest, and milk isn’t far behind,” said House.

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