Focus: Laid-off: Former Tyson Foods chicken farmers face high costs switching to eggs

Cal-Maine Foods

30/04/2024 11:00

By Tom Polansek
       CHICAGO, April 30 (Reuters) - Some U.S. farmers who once
raised chickens for Tyson Foods to slaughter are shifting to
sell eggs instead after the meatpacker closed six plants, a move
that left local suppliers with limited options for work.
        In one example, former Tyson suppliers in central
Virginia formed a cooperative that will produce cage-free eggs
for Indiana-based Dutch Country Organics on a dozen farms, after
Tyson closed its nearby Glen Allen plant last year.
        In Dexter, Missouri, the world's biggest egg company,
Cal-Maine Foods  CALM.O , in March finalized a deal to buy
another chicken meat plant Tyson shuttered. Cal-Maine recruited
local farmers to produce eggs.
        The switch to eggs, which carries high costs, reflects
the tough choices former Tyson suppliers around the country must
make following the company's 2023 decision to shut plants in an
effort to return to profitability in its chicken business after
misjudging consumer demand. 
        Egg farming also comes with risk as lethal bird flu
infections have hit laying hens harder than broiler chickens
raised for meat. The virus flared up for a third year this
spring, resulting in the culling of nearly 10 million hens
involved in commercial egg production so far this year.
Cal-Maine culled about 1.9 million birds this month after an
outbreak in Texas.
        
  
        MILLIONS TO UPGRADE
        Former broiler growers must spend millions of dollars on
barn and equipment upgradesto produce eggs, a notoriously
volatile market, 18 poultry producers, government officials and
industry experts told Reuters. Last year, egg prices tanked
after reaching record highs due to the worst-ever outbreak of
bird flu in poultry.
    "It's a very expensive investment from the grower," said
John Bapties, who is president of the Central Virginia Poultry
Cooperative and raised chickens for Tyson for 20 years before
the Glen Allen plant closed. 
    His cooperative is placing hens in barns that formerly
housed broiler chickens, and expects to sell cage-free eggs
produced by about one million birds to Dutch County Organics
within a year, he said. 
    Farmers needed to replace dirt floors in barns with concrete
and install nesting systems for hens, among other costly
renovations.     
    Taylor Lee, a former Tyson grower in DeWitt, Virginia, said
he decided against the switch. He will focus on raising crops
while keeping his poultry barns empty for now. 
    "They're painting a pretty picture with that co-op but it's
$2.8 million roughly to upgrade my farm to egg production," Lee
said. 
    Roger Reynolds, another Virginia farmer who supplied broiler
chickens to Tyson, said he is considering producing eggs for
Braswell Family Farms. His daughter found work there after
Tyson's plant closure eliminated her job. 
    Producing eggs means a different way of life, Reynolds said.
For one thing, hens lay most of their eggs in the morning,
meaning farmers cannot go to church on a Sunday without checking
their barns first, he said.
    
    CAGE-FREE EGGS
    The United States has about 125 million cage-free laying
hens, about 40% of total layers, U.S. government data show. More
are needed after some states banned sales of eggs from caged
hens and restaurants committed to cage-free supplies, Dutch
Country Organics CEO Lamar Bontrager said.
    "I've been getting calls like crazy," Bontrager said. "Those
guys are all concerned of where to procure their eggs."
    Dutch Country sells eggs to retailers including Walmart
 WMT.N , Kroger  KR.N  and Target  TGT.N , according to Virginia
officials.
    Former broiler growers offer egg companies an opportunity to
expand production because the farmers are already familiar with
poultry.
    "It's one of the ways that these companies are converting:
by grabbing old barns," said Brian Moscogiuri, global trade
strategist for Eggs Unlimited.
    Tyson declined to comment. The company said last year that
55 broiler growers supplied the Glen Allen plant and that it
offered them buyout packages. The plant had about 700 employees.
    Tyson has laid off corporate employees and said it will
close an Iowa pork plant, in addition to shutting chicken
plants. Farmers depended on the plants as markets for their
livestock.
    The meatpacker is slated to report quarterly results on
Monday.
    In Arkansas, the third biggest broiler-producing state,
Tyson closed two chicken plants. Some of its former growers
found work supplying other chicken companies, said Jared
Garrett, Arkansas Farm Bureau's director of commodity activities
and economics.
    "They lucked out," he said.

    JOBS WANTED
    Tyson closed chicken plants in Dexter and Noel, Missouri,
with about 700 workers and 1,500 workers, respectively.
Cal-Maine said it plans to initially employ about 100 people at
the Dexter plant. 
     "While I welcome Cal-Maine's investment in Dexter, it does
not right the wrongs of Tyson or guarantee new jobs for the more
than 2,000 Missourians now out of one," U.S. Senator Josh Hawley
of Missouri said in a statement to Reuters.
    David Wyman, Dexter's city administrator, also welcomed
Cal-Maine, though it is expected to work with a fraction of the
farmers who supplied Tyson. Cal-Maine said it expects to expand
over time and that revenue opportunities will be as good or
better than farmers had under previous contracts. 
    But some former Tyson suppliers are left with empty barns,
Wyman said: "They're really in bad shape."
    Egg farming is generally harder to get into operationally
than raising chickens for meat; requires more capital and labor
expertise; and carries higher disease risks, said Wendong Zhang,
an assistant professor and agricultural economist at Cornell
University. 
    "Due to the closure of the plants and termination of
contracts, the switch is in a way a move of necessity," he said.

 (Reporting by Tom Polansek; Editing by Caroline Stauffer and
Anna Driver)
 ((Thomas.Polansek@thomsonreuters.com))