News OUT IN THE COLD: Record LP Prices Slam Door On Poultry Industry

OUT IN THE COLD: Record LP Prices Slam Door On Poultry Industry

OUT IN THE COLD: Record LP Prices Slam Door On Poultry Industry
December 29, 2007 |

In a year when propane prices have gone through the roof to leave chickens and poultry farmers alike out in the cold, Dennis Maze isn’t counting his chickens before they hatch.But he is counting his blessings.For one, he belongs to a growers’ cooperative that locked in a contract price last fall at $1.39 a gallon with a 10-cent add-on limit.For another, three of his eight Blount County broiler houses received an energy retrofit in 2006, thanks in part to an Auburn University research project. As a result, he guesses he’ll be saving about 20 percent on his propane bill this winter.”People who haven’t locked in are at the mercy of that (propane) pipeline, and we haven’t even started into cold weather yet,” Maze was saying in November. “You can imagine what those prices will be when January gets here.”January is here now, and Maze — who’s been in the business long enough to remember 15-cent a gallon propane — says this winter’s record prices could spell the end for many of his peers since the majority of Alabama’s 13,000-14,000 poultry houses use propane heating.”You’re going to see ’em bankrupted if (integrators) don’t pay some gas supplements,” predicted Maze, a board member of the Alabama Farmers Federation and chairman of the State Poultry Committee. “We can’t afford it. I’d be better off to shut the doors on that winter batch. By the time I cut the payments out of it, there’s not enough money to pay the gas bill.”Within days after Maze locked in his contract, propane prices skyrocketed. Although the 10-cent add-on limit kicked in and he’s now paying $1.49 per gallon (10 cents more than last winter), he’s still far better off than those who didn’t lock in.By late November, other growers were paying anywhere from $1.90 to $2.15 a gallon, a record high that leaves even the propane companies in disbelief. Just four years ago, it was only 78 cents a gallon.”To be honest, I don’t know how they’re paying it,” said a manager of one northern Alabama propane company who used to raise chickens himself. “We’re not making a ton on it, and I know what they’re going through. I really do.”In late November, his company was charging growers $2 per gallon — just 25 cents over cost. Even at that slim margin, he said his poultry customers were scrambling for a better price.
“We’ve probably got less than 50 growers now. We used to have 300,” he said of his dwindling client base. “They’re just swapping around, trying to get the best prices they can (but) 25 cents isn’t making any money either. That’s just barely covering our costs.”The farmers, however, may not even fare that well. At $2.10 per gallon, that’s $1,680 per tank for most poultry houses. For farmers like Maze, who has eight houses, that would run $13,440. Most of that gas would be gone within the first 10 days when baby chicks require more heat.After that, a cold winter could mean two more fill-ups, forcing the three-month LP bill to soar to $40,320 — more than most growers can make on a batch of chickens.What’s worse, many growers will head into the winter months still trying to pay off last year’s gas bill. Some refinanced mortgages to pay off their bill; others simply asked the propane companies for more time.”We had some that it took the whole year to pay. Some of them still didn’t catch up,” said the propane company manager. “It’s just gotten so big. That was when it cost about $1.50 a gallon, and this is $2 now.”That’s why Dr. Gene Simpson, an economist with the Alabama Cooperative Extension System and professor of agricultural economics at Auburn University, strives to educate poultry growers on the importance of reducing their propane usage.”There are two aspects to your gas bill: one is the quantity of gas you burn, and the other is the price you pay per gallon,” said Simpson. “By contracting, you can reduce the price per gallon, but you also need to think about ways of reducing the quantity of gas you’re burning. Obviously, tightening the houses up and providing insulation are the primary things that our growers are doing.”That’s what Simpson, along with Extension engineer Jim Donald and program coordinator Jess Campbell, did with three of Maze’s houses. As part of a year-long research project, they insulated the sidewalls with cotton or fiberglass batt insulation, installed plastic sheeting down the walls to the ground and covered a lower portion of the inside walls with OSB board. In hard-to-reach areas obstructed by plumbing or electrical and along the top plates where sidewalls met roof, they sprayed a closed-cell polyurethane foam to prevent heat loss.While those measures cost $30,000 and were paid for through Experiment station funding, Maze spent another $20,000 to install V-Flex doors, replace some bad sheet metal on the exterior walls, remove the curtains and totally enclose the houses.While all the data is not yet available, Simpson said Maze’s estimation of a 20 percent propane savings appears correct. What’s more, Simpson says even greater savings are possible with dropped ceilings.Of course, growers already strapped for cash by high propane bills may figure such counter-measures as luxuries they can’t afford.”I wonder if they can afford not to,” said Simpson. “If it costs $10,000 to retrofit a house, assuming it’s borrowed money, interest and all, you need to have a payback of about $2,500 a year to justify that investment. We believe that with the fuel savings, we’ll be better than $2,500. … It’s like any other business — you have to continue to do maintenance and upgrades, and a chicken house is just a place of business. There are a lot of factors involved. You have to look at that house and estimate whether there’s enough useful life remaining in it.”In the meantime, Simpson says there other possibilities such as alternative fuel sources or USDA grant applications — neither of which are sure-fire solutions. He says the alternative energy sources may not yet be effective and the grant application is a nightmare.Maze, meanwhile, tries to make the best of a bad situation. He’s thankful the unseasonably mild December temperatures have reduced propane usage.”The poultry industry has built a lot of homes and put a lot of kids in college,” he said. “But it’s not as good as it was 15 to 20 years ago because the cost has kept going up, and the income hasn’t kept pace. I will not bash the companies – they are recognizing things, but there’s just so much the local folks can do. I’ve got a lot of respect for the (integrators), and they’ll listen to you. If you sit down and talk business with them and let them understand your situation and you understand theirs, you can go forward. This is just something that is out of everybody’s control.”For more information on energy retrofits, visit Auburn University’s Poultry Housing & Ventilation Web site at

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