MISSISSIPPI STATE -- The weak economy and high costs of production have given poultry companies a strong incentive to curtail production in spite of increased prices.

Feed accounts for about 70 percent of the cost of broiler production. As feed prices have stayed high, production has lowered, reflecting a loss in revenue for the state’s growers.

““Compared to last year, fuel costs are down, but the general cost of doing business is making tight margins even tighter,” said Michael Kidd, head of Mississippi State University’s poultry science department.

John Anderson, agricultural economist with MSU’s Extension Service, said the value of broiler production in Mississippi will likely be up just 2 percent this year compared to 2008, which posted a $2.19 billion value.

“Wholesale broiler prices through August were about 7 percent better than last year, but year-to-date production is likely to be down almost that much based on the number of broiler chicks hatched at the end of 2008 and so far in 2009,” Anderson said. According to the Mississippi Agricultural Statistics Service, the state produced 4.9 billion pounds of broilers in 2008.

“That was the largest production on record and likely 5 percent to 7 percent larger than this year’s production will be,” Anderson said.

In 2008, the state produced 437 million eggs, a number that has steadily declined since 2003. This year from January through July, the state produced 245 million eggs, about 3 million less than produced during the same time in 2008.

“This decline in production, along with pretty good export demand in the early part of the year, supported some price improvement for the industry,” Anderson said. “However, domestic demand has remained rather weak because of the recession.”

Egg prices are down about 25 percent over the past 12 months.

“This is not quite as bad as it sounds because early 2008 prices were very high, but the decline in egg prices has been dramatic,” Anderson said.

Poultry production is expected to increase some in the last half of 2009, with third and fourth quarter production coming close to 2008 levels.

“Whether the market can absorb this increase in production without a drop-off in prices will depend a lot on the behavior of the overall economy,” Anderson said. “As has been the case with all food products for the past year, the general economy is the key factor to watch.”

Kidd said the state is home to seven broiler companies. This includes Sanderson Farms, the nation’s fourth largest broiler company, and it is the corporate home of Cal-Maine Foods, the largest producer of table eggs in the nation.

The state’s poultry industry is vertically integrated, which means the poultry companies own the chicks, supply the feed and process the birds. Poultry farmers are under contract to raise the chicks to market weight for a fixed price.

“In 2007 and 2008, the farm-gate value of broilers, eggs and chickens exceeded $2 billion,” Kidd said. “This value does not take into consideration processing, exports and the spill-over effect of other industries supplying poultry companies and producers.”