Poultry growers know – when the price of your costliest input doubles or triples, there’s no choice but to pay up and get that next flock out the door.
This past winter, growers were faced with historically high propane costs that rose above $4.00/gallon. The unusually harsh winter had driven up demand for home heating while the record corn crop, which in many cases came out of fields late and wet, created increased need for grain drying. Then, for three weeks from late November to the third week in December, a major pipeline carrying hydrocarbons from Canada was shut down for maintenance.
“You had a transportation problem, a distribution problem, and a little bit of a shortage,” Arkansas Farm Bureau Assistant Director for Commodity Activities and Regulatory Affairs Bruce Tencleve told Ozarks Farm & Neighbor. “The combination of all three of those things really had a devastating impact on our poultry producers.”
That’s because during the wintertime, propane accounts for 75-80 percent of a poultry grower’s expenses. It’s needed to keep young chicks and turkey poults warm, explained Kelly Smith, Marketing and Commodities Director for Missouri Farm Bureau. “There was supply rationing here in our state,” Smith told OFN. “I don’t know that anybody ever really ran out of propane, but it was one of those things where it was hand-to-mouth as far as getting it in there. There was some concern that some of the propane companies were considering reneging on contracts that producers had for a specified price, but I think in the end everything turned out alright pricewise.” In one case, he said, growers had to have propane trucked in from Texas.
In January, according to Dr. Mark Jenner, University of Missouri Extension agriculture business specialist at the Bates County office in Butler, Mo., an Arkansas supplier said they couldn’t supply their clients, sending a panic through the system. “The supply system was stressed beyond its capacity,” Jenner told OFN. “From what I understand, there were a lot of fears that it could, really quickly, become really bad, but the system corrected itself before that happened.”
The surge in prices was short lived; as of March, the wholesale price of propane in the Ozarks was back down to $1.20, the same as it had been in October, whereas it was $4.00/gallon in the last week of January and $2.00 in early February (see chart).
Tencleve noted the high fuel prices had left it particularly unprofitable for growers to run older houses that are less efficient than newer ones. Most poultry are grown in this region under contract, and he said integrators worked to ensure propane supplies were available to their growers; in some cases, they reportedly paid a higher gas allowance than usual. And producers kept their flocks alive. “We didn’t see any spike in mortality,” Tencleve said. “I think the guys understand that if they don’t have any birds going out the door at the end of the batch, they cannot make any money… There might have been where they were a little short for a day or so, but for an extended period of time we did not see that, at least in our part of the world.”
And he said supermarket shoppers did not feel the surge in the cost of raising birds. “Rarely does the consumer see the impact of what our producers do,” Tencleve said. “The producer and the integrator absorb the price because if it spikes too much a consumer, as finicky as we all are, will jump to something that’s a little bit cheaper at the time. They do a great job of keeping the price to the consumers relatively flat, so the consumer doesn’t pay any more out of pocket to buy chicken or turkey.”
But the events of the winter may produce a shift in the grower population.
