Bad for Chickens, Good for Some Egg Farmers

Donning a paper biohazard suit and plastic booties, Paul Bahan steps over a thin plastic tape that serves as the last line of defense for the 600,000-plus hens at his AAA Egg Farms.

Bahan and other big egg producers in Southern California have put their farms on virtual lockdown, barring visitors, washing down trucks and disinfecting employees to keep their birds safe from exotic Newcastle disease.

The deadly virus has led state officials to order the destruction of about 1.2 million chickens in recent weeks and prompted the California Department of Food and Agriculture to draft a request to the governor for disaster assistance.

The virus is “a tremendous problem” because it can spread so easily, Bahan said. “This stuff is microscopic. It’s hardy. It sticks on tires, shoes and the hair in your nose.”

Yet as hard as Bahan and other big farmers are fighting to stave off the disease -- which is harmful only to birds, not humans -- industry observers say exotic Newcastle could be a blessing for many smaller California egg producers who are deeply in debt after four money-losing years.

That’s because the state has agreed to compensate egg operations for the losses they suffer when they’re ordered by agriculture officials to destroy their flocks. The state is paying farmers $2 to $5 per chicken, based on the bird’s age.

Observers say that for many longtime farmers who no longer have any desire to remain in the industry -- and have no buyers in sight -- this could be a way out, albeit a grim one.

“They’d be crying all right, crying all the way to the bank,” if their chickens were stricken, said one poultry producer who asked not to be named.

Alan Armstrong, an egg farmer in Valley Center in San Diego County with about 800,000 hens, agrees. “If you had a small flock and this hit you,” he said, “you’d definitely consider getting out.”

Bill Cramer’s family owns the Lake Mathews-area farm in Riverside County that was the first commercial facility to be hit by exotic Newcastle disease. After having to destroy 75,000 birds, he and his father are considering selling the ranch, perhaps to real estate developers.

“If it wasn’t this,” Cramer said, “it would be a matter of time before we’d be shutting down some of these older farms anyway.”

The reason for the grim outlook is simple: Supply has outstripped demand.

A glut of eggs from huge factory farms in the Midwest has pushed egg prices down precipitously for the last four years.

While the retail price of eggs in California has hardly budged over much of the last decade, the wholesale price has plunged 40% to 39 cents a dozen since peaking in 1996, according to Don Bell, emeritus poultry specialist with UC Riverside.

In 2002, California farmers on average lost about 6 cents for each dozen eggs that they produced.

“This could be a pivotal year,” said Doug Kuney, a UC farm advisor. “You can’t go forever without a positive income.”

Adding to the pressure is the fact that many in the egg industry have reached retirement age, having entered the business when California was adding about 1 million birds a year during the 1950s and ‘60s.

Back then, recalled Lee Schrader, an emeritus agricultural economist at Purdue University, California was the industry’s innovator, building state- of-the-art hen houses and packing facilities.

Not anymore. Higher land costs and other expenses, as well as increased regulation, have left little money for California producers to update their farms and make them more efficient.

The state’s egg industry, which reached its peak of 42 million hens in 1971, when the last outbreak of exotic Newcastle hit, has since shrunk by half to about 22 million birds.

After once producing so many eggs that it had to ship its excess to surrounding states, California now is in an egg-deficit position, importing a third of what residents here consume from farms in Iowa and other parts of the Midwest.

What the industry needs to thrive, experts say, is a reduction in the overall number of egg farms. But so far, Midwestern farmers have been unwilling to scale back for fear of losing customers. And because they are more cost-efficient than their California counterparts, they can afford to hang on longer.

About 17 egg operations in California have gone under since 1996. Others have stayed afloat by selling off land or equipment, but farm consultants say many are running out of tricks and warn that only the largest ranches will survive.

“I think we will see continued consolidation of what’s left,” Bell said.

Meanwhile, the assault against exotic Newcastle will continue.

To prevent a replay of the 1971 outbreak, which led to the destruction of 12 million birds at a cost of $56 million, farmers are doing as much as they can to limit their risk.

Bahan, for instance, has closed down his retail shop, which sold eggs to locals, and has begun using bleach to hose off all trucks that enter his facility. He also is requiring employees to change clothes, don paper suits and rinse their feet every time they walk from across the farm’s dusty parking lot to one of the farm’s 17 massive hen houses.

If exotic Newcastle were to hit just one of Bahan’s hen houses -- each with thousands of birds stacked in cages four high -- his entire 620,000-hen flock would have to be killed.

A producer as large as Bahan’s AAA, which supplies most of the eggs for Stater Bros. Markets, probably would be able to recover and restock.

But smaller producers may well choose a different course, Bahan acknowledged.

Even without exotic Newcastle, “some of them are already in a position of questioning how much longer they can continue,” he said.

“This will knock some people out. No doubt about it.”