Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisenthal and I'm Tracy Alloway. Tracy Um. You know,
Speaker 1: it feels like to some extent that inflation is abating,
Speaker 1: is fading every time we start a podcast saying that,
Speaker 1: I think we're just chinxing it, but well, we hope
Speaker 1: to be jinxing this one because there is one category
Speaker 1: that of food of goods, that is everyone is talking
Speaker 1: about these days, eggs. Eggs. We are. I am so
Speaker 1: excited to be talking about eggs. There are going to
Speaker 1: be a lot of puns. I have to say. That's
Speaker 1: my my warning for anyone listening to this episode is
Speaker 1: I'm going to crack a bunch of terrible chokes or
Speaker 1: should I say yokes? You want to keep going? You
Speaker 1: want to keep going, Tracy, I'm a real comedian. So
Speaker 1: egg prices are up a lot, and you know it's
Speaker 1: also personal to you because in addition to all these puns,
Speaker 1: you are an aspiring egg farmer, aren't you. I am
Speaker 1: like an armchair chicken breeder, like I would love to
Speaker 1: raise a bunch of backyard chickens one day. I haven't
Speaker 1: yet had the opportunity although now that I have two
Speaker 1: and a half acres in northeast Connecticut, like maybe one
Speaker 1: day I'm getting closer. But yeah, my dream is to
Speaker 1: have a flock of chickens, preferably silky chickens. Have you
Speaker 1: ever seen them? They look like the fluffy little muppets.
Speaker 1: So some silkies and maybe some Easter eggers because they
Speaker 1: produced the really cool looking eggs, and yeah, declare egg independence.
Speaker 1: Just have my own supply of eggs. So how about this.
Speaker 1: I have a good idea for this episode, probably like
Speaker 1: talk for about like five or ten minutes about why
Speaker 1: egg prices are going up, and then in just thirty
Speaker 1: minutes on sort of farming advice. Just sort of like
Speaker 1: a pure agricultural episode. That sounds perfect. Also, you're gonna
Speaker 1: have to include ten minutes for me to just like
Speaker 1: give all the random egg facts that I know. Well, okay,
Speaker 1: maybe we should also let the guests give every random
Speaker 1: eg facts. Okay, okay, if we have to know, Okay,
Speaker 1: eggs have suddenly become a big talking point, and I'm
Speaker 1: a little bit unclear why. Because egg prices have been
Speaker 1: going up for a while. There's been this big outbreak
Speaker 1: of avian flu in the US and elsewhere in the world,
Speaker 1: feed prices have been going up, and so we did see,
Speaker 1: for instance, benchmark egg prices. There is an egg price
Speaker 1: benchmark um go up. I think something like over the
Speaker 1: past year it was like a dollar for a dozen
Speaker 1: Midwest US eggs, and now it's up to more than
Speaker 1: four dollars. Egg c p I, which you can which
Speaker 1: you can measure, is up I think fifty nine percent
Speaker 1: year on year. But it has been happening for a while,
Speaker 1: and yet it seems to have exploded into the public
Speaker 1: consciousness relatively recently. That egg CPI chart is pretty wild.
Speaker 1: We have it on the terminal going back to its
Speaker 1: shooting higher, and I would say egg was kind of
Speaker 1: like gasoline, are one of these highly salient prices that
Speaker 1: people notice in a way they buy them regularly. You know,
Speaker 1: it's like you just know. You probably people have some
Speaker 1: intuitive sense how much they pay for eggs, as opposed
Speaker 1: to I don't know how much they pay for like
Speaker 1: auto insurance. It's something you're exposed to on a relatively
Speaker 1: frequent basis, and it does become personal because the way
Speaker 1: that you buy eggs also impacts the prices you're seeing.
Speaker 1: So if you live out in the country and you're
Speaker 1: buying eggs from a local farmer, the prices might well
Speaker 1: be lower than in the grocery store right now, because
Speaker 1: my understanding is that it's the big, big producers, the supermarkets,
Speaker 1: or the people who supply the supermarkets, who have actually
Speaker 1: been hit the hardest by the flu. All right, well,
Speaker 1: let's let's learn more from our guests. We have I believe,
Speaker 1: the perfect guest to talk about eggs and how to
Speaker 1: how to price them and how to make them. We're
Speaker 1: gonna be speaking with Glenn Hickman. He is the president
Speaker 1: of Hickman's Family Farms, a company that has tenderly and
Speaker 1: chickens producing eggs overall in the company. So, Glenn, thank
Speaker 1: you so much for coming on odd lots my pleasure.
Speaker 1: Thanks for inviting me. Uh you know, before we even
Speaker 1: get into the price of eggs and all that, what
Speaker 1: do you tell us a little bit about Hickman's Family Farms,
Speaker 1: Like how big is it? How does it compare, how
Speaker 1: does it distribute? Like just describe? Why should why should
Speaker 1: we listen to you? Uh? Well, thanks, Joe, It's yeah,
Speaker 1: It's the only job I've ever had. So if I'm
Speaker 1: not very good at it. I can't think about anything else.
Speaker 1: So our our business started. My grandmother had five hundred
Speaker 1: backyard chickens and you know, sold eggs to her neighbors
Speaker 1: off of the back porch. And I'm the third generation
Speaker 1: to run our business along with my siblings, and we've
Speaker 1: expanded from grandma's back porch to a multi state operation.
Speaker 1: We primarily market eggs across the Southwest, from southern Wyoming
Speaker 1: to Hawaii, and we've got about a nucleus of about
Speaker 1: ten million laying hens and we produce all different kinds
Speaker 1: of eggs. We produce brown eggs and white eggs, and
Speaker 1: organic eggs and just about any type of of eggs
Speaker 1: that are demanded by the consumers. So, just before we
Speaker 1: dive into why egg prices are going up, follow up
Speaker 1: question here, but can you give us the sort of uh,
Speaker 1: I say, I'm not doing this on purpose, but the
Speaker 1: lay of the land. No, this one just came to me.
Speaker 1: The lay of the land when it comes to the
Speaker 1: egg industry. So what proportion of America's eggs supply comes
Speaker 1: from you know, smaller farms or even independent backyard breeders
Speaker 1: versus big industrial agricultural corporations and do we import any eggs?
Speaker 1: I honestly have no idea, Tracy. The American Egg Board
Speaker 1: is our promotion and marketing arm of the egg industry.
Speaker 1: And everyone that has seventy five thousand laying hens and
Speaker 1: higher is part of the American Egg Board of contributes
Speaker 1: to the promotion of eggs. You know, that helps educate
Speaker 1: people and and hopefully drives demand. So if you look
Speaker 1: at the seventy and up, I would suspect there's about
Speaker 1: two hundred uh farms across the country. If you look
Speaker 1: at the top twenty in the in the United States,
Speaker 1: probably eighty plus percent of the eggs in the country
Speaker 1: are produced by the by the twenty largest firms there are.
Speaker 1: You know, there's been a proliferation of of kind of
Speaker 1: backyard and semi commercial layers over the past ten years.
Speaker 1: As you know, you know, Tracy, people get a little
Speaker 1: bit of land and decide that they like to have
Speaker 1: a few chickens and then face face the same thing
Speaker 1: that every farmer has is moderating their supply and demand
Speaker 1: and trying to come up with the right amount of products. So, uh,
Speaker 1: it's there has been a proliferation of backyard and semi
Speaker 1: commercial farms in the last ten years. One of my
Speaker 1: core memories Joe, when I was like six years old,
Speaker 1: is going to a very big chicken farm in Arkansas
Speaker 1: and thinking it would be really fun to play with
Speaker 1: a little like fuzzy yellow chicks. And I don't know
Speaker 1: if you've ever been to one, but that like there
Speaker 1: are dead chickens everywhere, or at least so it turned
Speaker 1: into a bit of a nightmare. But I still want chickens,
Speaker 1: some mince a little quickly, you know, just one more
Speaker 1: question about size. So it's ten million eggs and where
Speaker 1: does that put you in the rankings? Just so I
Speaker 1: get a sense of like what a mega producer looks like,
Speaker 1: how many chickens would like some of the big and
Speaker 1: who are the biggest producers of chickens. Cowmede Foods is
Speaker 1: the largest of chickens in the country. They got about
Speaker 1: I think forty four million birds. And then there's there's
Speaker 1: several other UH operations that are that come right under them,
Speaker 1: and so we're we're up there, Yeah, we're up there.
Speaker 1: But there you know, there's a family behind Cowmane Foods.
Speaker 1: There's a there's a family virtually behind every single egg farm.
Speaker 1: Any anyone that thinks that, uh, farming and especially animal
Speaker 1: production is not still family owned and operated, it's probably
Speaker 1: a little bit, a little bit stretch of the truth.
Speaker 1: We're all we're all in this because, um, you know,
Speaker 1: it's a family business. So why don't we jump to
Speaker 1: the topic at hand and talk about what's been going
Speaker 1: on with egg prices? So, first of all, what have
Speaker 1: you observed from your own seat in terms of prices?
Speaker 1: How much have they gone up for you versus you know,
Speaker 1: say a year ago, And what do you think is
Speaker 1: driving the increase? Well, Tracy, the the egg industry, by
Speaker 1: and larger is price takers. You know, there's a market,
Speaker 1: just like there's a market for corn, a market for
Speaker 1: soy beans and those kind of things, and so we
Speaker 1: price against that market. The previous three years n twenty
Speaker 1: one where some of the most horrendous years in terms
Speaker 1: of negative returns that the egg industry has ever experienced.
Speaker 1: So whenever you have negative returns, you do have people
Speaker 1: that eggs at the business are downsize of those kind
Speaker 1: of things. And then when bird flu happened, uh, you know,
Speaker 1: we started to lose birds in um in February and
Speaker 1: it's it's become you know, it's it's not stopped. We
Speaker 1: have Hickman's um is the last commercial farm to break.
Speaker 1: We had a a farm in Colorado with three hundred
Speaker 1: thousand organic birds and they broke on December seventeenth, So
Speaker 1: it's knocked on wood. It's been a month since we
Speaker 1: have we've had a commercial farm outbreak, but it's mostly
Speaker 1: in the wild bird population and um. You know, if
Speaker 1: you're gonna bring air to everything, from air to people,
Speaker 1: from the outside to the inside of your barns, you
Speaker 1: have it. You have a chance for to to spread infection.
Speaker 1: What happens, So how do you discover the incidents of
Speaker 1: avian flew among your the population within a farm? How
Speaker 1: do you how do you, Oh, we have it, and
Speaker 1: then what do you have to do? At that point?
Speaker 1: Every single barn, every single aviary is walked every single
Speaker 1: day by the caretaker of that barn. Any kind of
Speaker 1: surge immortality which avian influences cause a surge immortality is
Speaker 1: immediately identified and uh, corrective measures taken. So maybe it's
Speaker 1: a it's a situation where some hands got scared and
Speaker 1: they piled in a corner and those kind of things,
Speaker 1: But you try to figure out why, how to prevent
Speaker 1: that the next time. With avian flew, the spread of
Speaker 1: infection is so fast and so deadly that maybe one
Speaker 1: day you'll have ten jet chickens in a barn, the
Speaker 1: next day you have a hundred, the next day you'll
Speaker 1: have a thousand, and with it just to very few days,
Speaker 1: you know, the entire farm is involved in it. So
Speaker 1: avian flu is a disease that has been identified by
Speaker 1: the federal government as something that we need to address aggressively.
Speaker 1: So when you get identified as avian flu, the federal
Speaker 1: government mandates that the entire flock is euthanized. And that's
Speaker 1: what's happened in the in the AAN. So we've lost,
Speaker 1: you know, close to fifteen per cent of our nation's
Speaker 1: laying flock just this year. Some of that has been
Speaker 1: repopulated already, but a large amount hasn't. And you know
Speaker 1: that's that's led to constriction and supplied which in a
Speaker 1: commodity market, you know, they're either a demand surge or
Speaker 1: a supply um deficit leads to higher prices. We had
Speaker 1: this same situation you guys probably remember one that long ago.
Speaker 1: But and uh, you know in November, all the news
Speaker 1: was about the scare city of turkeys and high turkey
Speaker 1: prices because turkeys have been involved in AVIA two and
Speaker 1: Thanksgiving is traditionally the highest demand for turkeys, so you
Speaker 1: had that confluence of high demand and restricted supply. What's
Speaker 1: happened in the egg business is exactly the same. Our
Speaker 1: best market for the year is always during the holidays,
Speaker 1: when there's extra family occasions going on, when there's extra
Speaker 1: baking going on and those kind of things. So we
Speaker 1: had the maximum constriction of supply at the same time
Speaker 1: we had our historical highest demand period since the holidays,
Speaker 1: you know, in terms that your you know, all listeners
Speaker 1: would understand, We've been almost limited down every day in
Speaker 1: the egg market. So the prices are fast correcting as
Speaker 1: we've seen a reduction demand. This is why I didn't
Speaker 1: really understand the timing, because like everyone started talking about
Speaker 1: it right when prices actually started going down. So I
Speaker 1: have so many questions already. Um, But on the bird
Speaker 1: flu itself up, one thing that I heard was like
Speaker 1: it risks becoming endemic. So once a bird has the virus,
Speaker 1: they sort of like carry it in them at all
Speaker 1: times and it can come out again at a later date,
Speaker 1: can you maybe talk a bit more about like how
Speaker 1: possible is it to eradicate avian flu altogether or once
Speaker 1: it's widespread, does it basically just become something that you
Speaker 1: have to deal with constantly. Tracy, we can kind of
Speaker 1: compare it to covid that there's been mutations that become
Speaker 1: more infectious but less lethfual and and those kind of things,
Speaker 1: and I think that's the same kind of pattern we're
Speaker 1: seeing with avian influenza. So you know, when when we
Speaker 1: think about eradicating um, that that ship has sailed, will
Speaker 1: never eradicate avian flu because then the wild bird population
Speaker 1: and as it mutates those wild birds, you know, are
Speaker 1: our super spreaders. They might great they they land in
Speaker 1: the same ponds that some of our domestic water values
Speaker 1: and stuff like that. So, um, you know, there is
Speaker 1: there's you know, taco vaccine for avian fluid um, but
Speaker 1: that's a that's a different road that you know, will
Speaker 1: will involve all commercially all commercial poultry probably globally, and
Speaker 1: so it's it's really has to be well thought out,
Speaker 1: and um, it's probably a couple of years away from
Speaker 1: having any kind of decision where there might be widespread
Speaker 1: uh Avian influenza vaccines that we can start to use commercially.
Speaker 1: You know, I want to sort of I want to
Speaker 1: get back to the current details in a second. But
Speaker 1: other eggs futures, because I don't think I've ever seen them,
Speaker 1: And yet my the CNME, I think was founded in
Speaker 1: the Chicago butter and egg board are the futures there?
Speaker 1: Do you have some other way of like hedging these
Speaker 1: kinds of risks as a major operator? Know, we don't.
Speaker 1: I think that the egg futures were kind of delisted
Speaker 1: in the early seventies because even back then the concentration
Speaker 1: was so high that there wasn't enough liquidity to to
Speaker 1: keep it from being manipulated. Oh interesting, because when you
Speaker 1: say the concentration, the concentration of production was such that
Speaker 1: and is that still the case? Like Joe, I'm so
Speaker 1: fair enough, fair enough my memory when I was ten
Speaker 1: years old, Joe, you and I can hatch a plan
Speaker 1: to relaunch egg futures. Um. So one other thing when
Speaker 1: it comes to what's driving up egg prices, and there
Speaker 1: seems to be a little bit of debate about whether
Speaker 1: it's mostly the flu or whether it's also down to
Speaker 1: factors like higher chicken feed or combination some combination of both.
Speaker 1: Can you talk about maybe the input costs that go
Speaker 1: into having a egg slash chicken farm, Tracy and Joe.
Speaker 1: When and um, the Ukrainian War started, it really added
Speaker 1: fuel to a fire that already existed. So our grain
Speaker 1: costs have just exploded, and probably every businessman will tell
Speaker 1: you between labor utilities and everything in our environment has
Speaker 1: just gone up, you know, exponentially in some cases. So
Speaker 1: the at some point in time, even though we're priced takers,
Speaker 1: that has to be reflected in the selling price or
Speaker 1: you won't have anyone around to sell eggs. So, um,
Speaker 1: there is a there is a degree of higher costs
Speaker 1: that have been reflected into the price of eggs, and
Speaker 1: it it kind of has to happen, are you know,
Speaker 1: like you said, corn price you know, just blew up
Speaker 1: when the Ukrainian War started, and we haven't got much
Speaker 1: relief since then. I want to go back, you know.
Speaker 1: One of the themes that comes up on this podcast
Speaker 1: from time to time is how we pay the price
Speaker 1: during sort of inflationary surges of any sorts. It's often
Speaker 1: us paying the price for a downturn that happened before,
Speaker 1: and you know, a washout happens, farms or entities come
Speaker 1: out of the market and then supplies constraint. Prior to
Speaker 1: this sort of like boom that it was actually a
Speaker 1: very rough couple of years for the industry. Can you
Speaker 1: talk a little bit about what you know, the last
Speaker 1: few years prior to the surgeon prices, what was causing
Speaker 1: it and you know, just the experience COVID itself and
Speaker 1: the pandemic and the sort of an initial uh, the
Speaker 1: initial effects that that had on egg production. Well, you guys,
Speaker 1: you know, I think it's you know, it's seen in
Speaker 1: a lot of industries. You know, when the price of
Speaker 1: oil gets ugly and people stopped drilling, and the semi
Speaker 1: conductors become too too many, and people stopped building new
Speaker 1: factories and those kind of things, and then to demand
Speaker 1: catches up and then the same thing happened with a supplies.
Speaker 1: We have a we have a situation where we had
Speaker 1: very very poor we we had negative returns as an
Speaker 1: industry for three years running. And that causes you know,
Speaker 1: constraint of of expansion, capital and growth, and that's kind
Speaker 1: of what happened. And so now you know, we're probably
Speaker 1: going to see some some growth in our in our country,
Speaker 1: we have to uh. We have several states that have
Speaker 1: mandated cage free laws. We have several large customers that
Speaker 1: have adopted cage free as their uh future. And in
Speaker 1: most cases, a cage facility doesn't lend itself to an
Speaker 1: easy remodel to cage free, and that takes a lot
Speaker 1: of capital. So we're going to see some constraints when
Speaker 1: it comes to expansion because of of not really knowing
Speaker 1: what the market is going to demand. And we'll have
Speaker 1: to kind of play that by years as as the
Speaker 1: situation you know, plays out. That's interesting. I just want
Speaker 1: to go back those three years that you're talking about
Speaker 1: bad return. What was going on that cause I'm still
Speaker 1: trying to wrap my head what caused those three rough yards. Well,
Speaker 1: the price of grain started to go up, like I said,
Speaker 1: about three years ago, and then just let the fire
Speaker 1: when the Ukrainian War happened. In in context, you guys,
Speaker 1: a laying hand, it's kind of kind of you know,
Speaker 1: works out this way. One laying hand will eat one
Speaker 1: bushel a corner year that one laying and will also
Speaker 1: produce enough eggs for one person. And so when the
Speaker 1: bushel of corn in some area and some uh our
Speaker 1: our costs went up by two and a half times,
Speaker 1: then that's got to be you know, reflected all the
Speaker 1: way down the uh the in the rest of the
Speaker 1: food chain. You know, we we have a we have
Speaker 1: a policy in this in this country where you know,
Speaker 1: whether you're talking about ethanol or bio diesel, they come
Speaker 1: from food crops. And you know, when we are as
Speaker 1: a country we've made a decision that we're going to
Speaker 1: burn part of our food to make ethanol or or
Speaker 1: part of our soybeans to make biodiesel, that does also
Speaker 1: carve into the supply that's available for livestock. So just
Speaker 1: on on on the sort of cyclical note when it
Speaker 1: comes to for instance, if you have an outbreak of
Speaker 1: avian flu and you have to destroy a large chunk
Speaker 1: of your flock, do you get compensation from the from
Speaker 1: the government for doing that if you're mandated to do it?
Speaker 1: And also a similar question for the transition to cage
Speaker 1: free chicken raising, do you get grants or something like
Speaker 1: that for the further capital investment? So since the government
Speaker 1: government does mandate that you have to depopulate your farm.
Speaker 1: They do pay a bit of a stipend, so that
Speaker 1: it basically pays your cost of depopulation, your cost of
Speaker 1: cleaning and disinfecting, and approximately the value of the birds
Speaker 1: that were in the barn at the time. It doesn't
Speaker 1: pay you for the loss of eggs. It doesn't pay
Speaker 1: to buy a new chicken to put in the barn.
Speaker 1: So it really does lack um you know, a component
Speaker 1: of a full compensation for the disaster that happened. You know,
Speaker 1: since your company has been around for so long, I
Speaker 1: feel like it might be uniquely positioned to answer this.
Speaker 1: But I'm curiously efficiency gains over time in the egg business,
Speaker 1: or like how much human labor is required to produce
Speaker 1: I don't know a million eggs versus how much it
Speaker 1: would have taken twenty years ago. It's how has it
Speaker 1: changed over time and the operations of farming, its scale
Speaker 1: that you've seen, and what kind of games you know,
Speaker 1: how does it look different than if a time traveler
Speaker 1: had come from twin years ago? The big changes? Joe,
Speaker 1: I looked at a study um that goes back to
Speaker 1: nineteen sixty and to kind of give you a um
Speaker 1: uh ballpark, But if you take it from the production
Speaker 1: of corn through the production of the eggs four times
Speaker 1: as efficient today that that acre of of of grain
Speaker 1: production will produce four times as many eggs as it
Speaker 1: did in nineteen sixty. Almost all of that efficiency has
Speaker 1: been reflected in the marketplace. It's a highly competitive marketplace.
Speaker 1: So as soon as a producer figures out how to
Speaker 1: cut their costs and they feel like they have a
Speaker 1: market advantage, they might reflect that in their price to
Speaker 1: win greater market share. And so, um, I think that's
Speaker 1: you know, the American consumer up until recently. Um. You know,
Speaker 1: we a year ago last summer, we were selling eggs
Speaker 1: for virtually the same price that we did in nineteen sixty,
Speaker 1: and so all of that, all of those efficiencies have
Speaker 1: accrued basically to society's benefit. You know, You've mentioned several
Speaker 1: times that egg farmers are price takers, and I'm wondering
Speaker 1: as you see the prices shoot up and we see
Speaker 1: more and more people apparently talking about this, you know,
Speaker 1: here in New York, I think it's gone up from
Speaker 1: like two or three dollars per dozen eggs to like
Speaker 1: maybe seven or eight recently. And I've seen some people
Speaker 1: on Twitter joking that the price of a carton of
Speaker 1: eggs is higher than the minimum wage per hour in
Speaker 1: certain states. Now do you see the consumers start to
Speaker 1: push back as the prices go higher? I guess another
Speaker 1: way of asking that is, you know, how how elastic
Speaker 1: is demand for eggs? Egg demand is very any elastic tracy.
Speaker 1: What you do see is some of these higher levels
Speaker 1: is a family that might have bought, um, five dozen eggs, uh,
Speaker 1: might go in and decide, I'm only going to buy
Speaker 1: a dozen and a half or eighteen eggs and see
Speaker 1: if the prices come down next week. And we have
Speaker 1: seen that happen. So there's been some of that, you
Speaker 1: might say consumer pullback also in the you know kind
Speaker 1: of the industrial uses. You know, if if a bakery
Speaker 1: is a commercial bakery might be making a recipe that
Speaker 1: takes thirty pounds of eggs per hundred pound batch of
Speaker 1: whatever they're making, that might be you know, cutting back
Speaker 1: to twenty nine or eight to to you know, try
Speaker 1: to make the egg supply last a little bit longer
Speaker 1: and there So there's all different kinds of coping. We
Speaker 1: have retailers, uh, you know, across the country. Some have
Speaker 1: reflected the price of eggs um and and some have not.
Speaker 1: And so there's all kinds of different strategies that are
Speaker 1: deployed by retailers and and frankly, we I can't begin
Speaker 1: to understand any of them just on this note. You know,
Speaker 1: if if I'm a big food producer, say I'm Kraft
Speaker 1: Heinz or someone like that, and I'm buying an enormous
Speaker 1: amount of eggs per year, do I buy them on
Speaker 1: a long term basis? Do I have like an annual
Speaker 1: egg contractor am I going out every week and tapping suppliers?
Speaker 1: I don't want to speak to either of the companies
Speaker 1: that sure, just generally generally, if I'm a big egg continuer, yes,
Speaker 1: we we have all kinds of different arrangements with our customers.
Speaker 1: So yes, some some of them do you know, forward purchase,
Speaker 1: you know, six months or a year in advance, and
Speaker 1: some prefer to buy basically on the spot market, and
Speaker 1: we have everything in between. So it's, you know, just
Speaker 1: kind of the strategy that that that customer wants to execute.
Speaker 1: I'm still a little unclear, okay when you talk about
Speaker 1: the spot market for eggs. So let's say a grocery store,
Speaker 1: um that you distribute, Uh, your eggs in are they like? Uh,
Speaker 1: I'm trying to think about how to frame the question,
Speaker 1: but is there like, is there a de facto competition
Speaker 1: between you and other egg producers regularly and who gets
Speaker 1: that shelf space? Do they put out a bid? Do
Speaker 1: they put out a price? Like? How does that actually work? Uh?
Speaker 1: In practice the setting of the wholesale price at a
Speaker 1: retail outlet. Yeah, generally, you know, Joe, We've had relationships
Speaker 1: with some customers, you know, since the beginning of our company,
Speaker 1: and we've had relationships that are annual bids and sometimes
Speaker 1: you win the bid and sometimes you don't, and we
Speaker 1: have everything in between. So there is a lot of
Speaker 1: of of I guess strategy that goes into building your
Speaker 1: your universe of customers and and balancing you know, you
Speaker 1: don't want a customer base that is a medium eggs
Speaker 1: because you know, chickens don't lay a hundred percent medium
Speaker 1: makes so you have to kind of balance that with
Speaker 1: what you with what your production is, and what your
Speaker 1: what your desired customer basis. So, in the current environment
Speaker 1: of higher egg prices, what do we see egg producers
Speaker 1: doing in response? Is it all out expansion to try
Speaker 1: to take advantage of the price increase or are you
Speaker 1: still a little bit cautious given given the recent history
Speaker 1: of the past couple of years that you were discussing,
Speaker 1: what exactly do you do here? Crazy? We had a
Speaker 1: pretty industry wide I think we had a pretty good
Speaker 1: hole to fill, and uh so that was that was
Speaker 1: what happened with the with the earnings that when we
Speaker 1: started to experience the elevated prices due to avian flu
Speaker 1: and so as a I can't speak to the industry.
Speaker 1: I as a company, we don't see the demand for
Speaker 1: eggs um warranting a big expansion. We're not going to
Speaker 1: We're not going to go from our current flock size
Speaker 1: and add a million birds just because there's a temporary shortage.
Speaker 1: Those those cages that are empty due to due to
Speaker 1: aving influenza will be refilled at some point in time,
Speaker 1: and we're hustling to refill ours. And I'm sure everybody
Speaker 1: that has been affected as hustling to refill theirs. I see,
Speaker 1: So you have because you because you have spare capacity.
Speaker 1: There's no necessarily need for like extra capital investment. It's
Speaker 1: sort of just the natural process of repopulating the existing space. Well,
Speaker 1: Joe about you might say, typical layer barn is designed
Speaker 1: to last thirty years, So you know, there's there's three
Speaker 1: percent of the of the population that needs to be
Speaker 1: rebuilt or or start over every single year. And when
Speaker 1: you had a period of time where you where you
Speaker 1: really had negative returns, you might have some deferrals that
Speaker 1: you need to catch up on. So I think there's
Speaker 1: you know, there's probably as as many answers to that
Speaker 1: question as there are egg producers. Glenn. I'm looking at
Speaker 1: your website, which by the way, is full of chicken
Speaker 1: and egg punds, so um, I love that. But there's
Speaker 1: there's a little press release on your on your what's
Speaker 1: cracking plog um about you expanding into feed production in
Speaker 1: and I'm wondering if that kind of I guess vertical
Speaker 1: integration is the future for farms if they're dealing with
Speaker 1: you know, the prospect of higher grain prices, um and
Speaker 1: things like that. Is that something we're going to see
Speaker 1: more of egg farmers who are also producing their own
Speaker 1: chicken feed. You know, we're a little bit novel in
Speaker 1: that we are vertically integrated. We we we make our
Speaker 1: own packaging, we grow our own replacement stock. We we
Speaker 1: cook eggs in terms of hard boiling them. We have
Speaker 1: a liquinate plan. We uh we actually the the what
Speaker 1: you're reading on there is back then we built a
Speaker 1: new feed all that allowed us to bring the entire train.
Speaker 1: So the Southwest doesn't produce any green. So we have
Speaker 1: a train to part Iowa every three weeks and the
Speaker 1: entire hundred ten cars come to count our farm and
Speaker 1: and we unload. We sent it back to get another load.
Speaker 1: So um, that's everything that we do is to try
Speaker 1: to gain little efficiency and and try to reduce our
Speaker 1: our cost of production. You know something that's interesting on
Speaker 1: your website you talk about a re entry program and
Speaker 1: having a significant amount of hiring among the formerly incarcerated.
Speaker 1: Talk to us about what should people know or what
Speaker 1: should policy makers know about creating jobs and the opportunity
Speaker 1: in this area, because I think it's really interesting. And
Speaker 1: of course, with the sort of supposedly very tight labor markets,
Speaker 1: I imagine you have a lot of employers trying to
Speaker 1: look for pools of potential labor that they perhaps hadn't
Speaker 1: considered before. Joe, we we started our our program and
Speaker 1: when we started, uh, you know, re employing, employing uh
Speaker 1: X inmates. And you have to remember that very few,
Speaker 1: very very few inmates get life sentences, so everybody is
Speaker 1: going to be released from prison at some point in time.
Speaker 1: Agriculture sometimes is not seen as the most attractive job
Speaker 1: out there, so it's always been difficult to get labor
Speaker 1: to work with animals and they're you know, they're dusty,
Speaker 1: they're smelly, all those kind of things. So we've been
Speaker 1: an employer of of x ndmates since then. We actually
Speaker 1: have a full time manager who um, if needbe, he'll
Speaker 1: pick him up on their release date. He'll take him
Speaker 1: into town, he'll get him a I D. You know,
Speaker 1: social Security number again and those kind of things. And
Speaker 1: we have we have forty what we refer to as
Speaker 1: transitional housing apartments that we allow them to live there
Speaker 1: for a a stipend and for one year and if
Speaker 1: they'll if they'll lead between nine and fifteen months, we
Speaker 1: give them half their rent back. We want to continue
Speaker 1: their transition into society, not just you know, go from
Speaker 1: one institution to another. And it's been very, very successful,
Speaker 1: and we've got a lot of folks who you know,
Speaker 1: probably wouldn't have had as many opportunities that they're working
Speaker 1: force post release and even after they we've had we've
Speaker 1: had inmates working force for twenty years and raising families
Speaker 1: and paying taxes, um Glenn, very important question. But you know,
Speaker 1: we talked about wholesale egg prices starting to turn down.
Speaker 1: Now what are you seeing in terms of the trajectory?
Speaker 1: Are we going to see egg prices go back to
Speaker 1: where they were you know, a year ago? How quickly
Speaker 1: is that going to unfold? I'm probably not a very
Speaker 1: good predictor when when, and probably every investor shares a
Speaker 1: little bit of this. When things are really really bad,
Speaker 1: you can't see the end of it, and when things
Speaker 1: are really really good, you can't see the end of it.
Speaker 1: And so we're in the correction phase right now. Where
Speaker 1: that where that correct too? Is anybody's guests? I suspect
Speaker 1: that we will. We will correct to a level that
Speaker 1: is is probably higher than what we've saw in the
Speaker 1: previous three years, but less than what we saw in
Speaker 1: the previous you know, a couple of months, I wanna,
Speaker 1: I wanna have a couple of minutes for advice on
Speaker 1: Tracy's egg operation. But before we do, you know, you're
Speaker 1: in Arizona, and Um, I'm curious about how big of
Speaker 1: a deal water is or and you know, there's all
Speaker 1: there's so much development in Arizona, but from housing, it's
Speaker 1: all the semiconductor factories coming in that employ a lot
Speaker 1: of or that need a lot of water to wash
Speaker 1: the silicon, et cetera. Can you talk a little bit
Speaker 1: about the significance of a water in your business and
Speaker 1: how you think about like maintaining a future sort of
Speaker 1: like secure water supplies so you can continue with your
Speaker 1: farm over time. Joe. Water has been an issue in
Speaker 1: Arizona ever since the ho Ho Kom Indians started digging ditches,
Speaker 1: and so um, it's going to continue to be an issue.
Speaker 1: It's uh no one wants to admit that there may
Speaker 1: not be enough. Our desert gets between six to nine
Speaker 1: inches of rainfall a year and that doesn't support a
Speaker 1: lot of uh, you know, people or plants, and so
Speaker 1: we have to depend on either groundwater or or surface
Speaker 1: water that's delivered from far away our farms. We have
Speaker 1: the luxury of of of we drilled wells, We have
Speaker 1: great um aquifers, and we own the water rights to
Speaker 1: continue to you know, produce all the water we need
Speaker 1: for for our operations, So I'll buy on the backyard
Speaker 1: chicken education. What chicken breeds do you recommend for the
Speaker 1: best um egg product activity, Tracy. If you're not gonna
Speaker 1: allow me from dissuading you from from e then it
Speaker 1: just depends the Virtually all the commercial layers are either
Speaker 1: a white legger or brown lager in that is uh,
Speaker 1: the most prolific um layer, and that when we say
Speaker 1: prolific it, what we mean is it'll it lays the
Speaker 1: most eggs relative to the feed consumed. And so you
Speaker 1: get some of your some of your smaller breeds that
Speaker 1: that they don't eat as much feed, but they don't
Speaker 1: lay as much eggs, and you get some of the
Speaker 1: larger breeds like Rhode Island reds, and some of those
Speaker 1: that are gonna are gonna eat more per dozen eggs.
Speaker 1: So um, if if you're if you're in a production,
Speaker 1: then a white lager In is your is your choice.
Speaker 1: If you're if you're interested in in in plumage or
Speaker 1: hll color, then the sky's a limit. I am almost
Speaker 1: exclusively interested in those things and also building the world's cutest,
Speaker 1: most adorable chicken coop. But Glenn can I just ask,
Speaker 1: why do you want to dissuade me from from starting
Speaker 1: a backyard flock? Would be competition? Um. So, you guys
Speaker 1: and everybody in animal agriculture really really takes our responsibilities
Speaker 1: very very uh carefully. And so when we take an animal,
Speaker 1: whether you're talking about your dog or a chicken or
Speaker 1: anything in between, and we take away its ability to
Speaker 1: forage and find for itself, then we have a moral
Speaker 1: obligation to take care of that animal. So, you know,
Speaker 1: we see a lot of backyard pets and animals and
Speaker 1: those kind of things that the owners go away for
Speaker 1: a weekend and maybe they don't get fed, maybe they
Speaker 1: don't get watered, and those kind of things. So owning
Speaker 1: an animal is that especially you know, um in your
Speaker 1: backyard is something that you want to really think carefully about.
Speaker 1: And that's any animal, Tracy. So I'm just I'm just
Speaker 1: telling you might be might be easier to get a
Speaker 1: neighbor to watch your kids than it is to watch
Speaker 1: chickens over the weekend. That is totally fair. And this
Speaker 1: is actually exactly why I do not yet have chickens.
Speaker 1: But one day, one day, when you're not going back
Speaker 1: and forth between Connecticut and New York City. Lenn Hickman,
Speaker 1: president of Hickman's Family Farms. I learned so much about
Speaker 1: the egg business from chatting with you. Really appreciate you
Speaker 1: coming on the oddlines, happy to for the opportunity. Guys
Speaker 1: can tell me any time. So Tracy're gonna hold off
Speaker 1: for a little while. Yeah, I mean, look, I've been
Speaker 1: not holding off for years now, so I think I
Speaker 1: can do it a little a bit longer. But one day,
Speaker 1: one day I will have my flock of muppet looking
Speaker 1: silky chickens. You know. It's it's so funny. It's so
Speaker 1: interesting thinking about like animals as essentially these machines for
Speaker 1: turning like grains into like really delicious food. In the
Speaker 1: math of like, okay, one uh, one chicken one bushel
Speaker 1: of corn a year equals one human, about as much
Speaker 1: as a human would eat in here. It's pretty nice.
Speaker 1: It's a nice little it's a nice nice math there.
Speaker 1: Uh yeah, And I mean Glenn kind of touched on it.
Speaker 1: But the whole efforts of the industry to breed the
Speaker 1: most efficient chickens possible, not just in terms of egg laying,
Speaker 1: but also in terms of breast size and things like that,
Speaker 1: and that that stand about how an acre of corn
Speaker 1: uh resulted four times as many eggs as it did
Speaker 1: in the sixties. You know again, that's that's technology there.
Speaker 1: We don't really think about tech right as a egg,
Speaker 1: but that's like that's egg tech. Yeah. Um. The other
Speaker 1: thing that was really interesting and I hadn't realized that
Speaker 1: the past couple of years had been bad one I hadn't,
Speaker 1: but then it a lot of sense. Why are we
Speaker 1: paying so much? It's it's that, I guess yet another
Speaker 1: combination of lower production and supply kind of being taken
Speaker 1: out by the Avian flu plus rampant demand around the
Speaker 1: holidays just pushed everything up. Trying to think of some
Speaker 1: like egg related pun on perfect storm. You know, you
Speaker 1: can't think of any egg pun. It's so easy perfect
Speaker 1: or should I say over easy? We should Okay, all right,
Speaker 1: I'm sorry. This has been another episode of the Odd
Speaker 1: Thoughts podcast. I'm Tracy Alloway. You can follow me on
Speaker 1: Twitter at Tracy Alloway and I'm Joe wi Isn't all.
Speaker 1: You could follow me on Twitter at the Stalwart. Follow
Speaker 1: our producers Carmen Rodriguez at Carmen Armand and Dashville Bennett
Speaker 1: at dashbot, and follow all of our podcasts at Bloomberg
Speaker 1: under the handle at podcasts, and for more odd Lots content,
Speaker 1: go to Bloomberg dot com slash odd Lots, where we
Speaker 1: have transcripts, we blog, and we have a we Clean
Speaker 1: newsletter that you can get every week in your inbox.
Speaker 1: Go sign up for it. Thanks for listening.