Consider how the typical egg producer makes money: he buys a 17-week-old pullet for $3.25. Then, over the course of the next year (the normal productive life of the bird), he spends some $9.40 maintaining it -- $7.60 on feed and another $1.80 or so for housing, lighting, and labor. His cost per bird: around $12.65. The average egg layer produces 21 dozen eggs in its year of work, which, at 60¢ a dozen to the farmer, generates $12.60 a year. If the farmer is lucky, he'll net another 25¢ by selling the chicken once its production falls off. In this example, the gross margin is a scant 1.6%.
Like many businesses, the commercial egg trade has undergone tremendous changes over the past two decades. What used to be a good-sized chicken ranch -- say, 100,000 birds -- hardly counts by today's standards. Given cost pressures, the most competitive producers have sought economies of scale -- big farms can, for example, mix their own feed. Currently there are about 50 egg farms in the United States with more than a million chickens; among them they manage nearly 55% of the country's almost 250 million layers.
Even the big guys have been hurt by recent trends. Americans have been eating a lot fewer eggs; since 1960 per capita consumption has plummeted from 335 to 235 per year. And despite the efforts of operators to hold the line, the costs of feed, labor, and overhead have been climbing. All this would be fine if egg farmers could keep on raising prices. But the price of a dozen eggs is continuously squeezed by oversupply. So every year farmers are driven out of business.
From the point of view of the individual egg rancher, there are very few opportunities for cost savings. Over the past decade, the farmer has brought on all kinds of automated equipment to minimize his labor needs. The modern-day chicken house is filled with Rube Goldberg-like contraptions: cage systems, feeding and watering systems, egg-packing systems. Eggs are shipped to market without being touched by human hands. So what else can farmers do? They can fiddle around with feed additives and look for genetic improvements. Smart operators are already doing these things.
But nobody -- nobody -- is using contact lenses.
Randy Wise figures he has three key selling points on which he can build his case. The first one -- that the lenses reduce cannibalism -- is something he's known since the 1960s. The calming effect of the color red has been corroborated again and again over the past several years by research on light and color at agricultural universities. The other two benefits -- that lenses reduce feed consumption and that they increase egg production -- have been noticed only more recently. Supported by fewer tests, they're more controversial. "Basically," Wise says, "we try to figure out what the rancher is most concerned about. But we like to talk about all three.'
Dealing with the effects of pecking, he notes, has been a chronic problem for egg farmers. All chickens normally establish a social hierarchy, or pecking order, though some breeds are more aggressive than others. When one bird bleeds, the other birds peck at it. Ranchers can lose up to a quarter of their flock to such cannibalism. They mitigate the results of this behavior by beak trimming. The procedure, better known as debeaking, uses a hot knife to cut off the tip of the beak. Debeaking, which costs from 3¢ to 5¢ per bird, doesn't solve the problem. Chickens still peck, Wise says, but less harmfully. The procedure reduces the 25% mortality rate, but it can still run as high as 12% to 15%.
"Since the red lenses absorb all colors but red," says Wise, "the chickens can't distinguish blood, because everything looks red. If the chickens don't see blood, they don't peck." In tests, Wise notes, the mortality rates for birds wearing red lenses dropped to less than 8%. And some of those deaths could be attributed to causes other than pecking. On 1,000 birds, farmers could save from $120 to $150, just as a result of reduced mortality. That's at least 12¢ per bird.
The effect of the red lenses on appetite results in even greater savings. It was first documented in a 1986 test at Virginia Polytechnic Institute. The researchers found that birds wearing lenses ate an average of 7% less than the control group. Wise says that the experiments in other locations confirm the same levels of feed savings, in some cases greater. "Because [chicken] activity is lower," he says, "the chickens don't need to eat as much." Using the 7% figure, a farmer could save around 54¢ per bird per year, or more than 4% of the annual investment -- a savings that would go straight to the bottom line.
But the biggest surprise is on the production side: chickens that eat less don't produce fewer eggs. Birds with lenses do tend to be a bit leaner, Wise says, citing the Virginia Polytechnic study and several other commercial trials. But the number of eggs they lay -- and the size of those eggs -- doesn't change. "The tests show that, if anything, production goes up by 1% to 3%," Wise says. For the average egg farmer, a 1% increase means another 13¢ of revenue for every bird -- another boost to profitability.
Altogether, Wise argues that the savings add up to a significant shift in the cost structure of egg production. Obviously, the value of these benefits fluctuates with the market. But right now, he talks about savings in the neighborhood of 80¢ per chicken -- practically 4¢ for every dozen eggs. Not bad if you consider the cost of a pair of lenses: 15¢ if you sign a three-year contract (18¢ or 19¢ otherwise). Animalens estimates that, based on an installation rate for two people of 150 pair per hour, operators should be able to install them for approximately 10¢ per bird. On 100,000 chickens a farmer would spend around $25,000 to save two to three times that. We're talking about a gross margin increase from 1.6% to 6% -- not chicken feed.
