A financial comparison of small-scale quail and laying hen farm enterprises (2024)

Abstract

Smaller scale agricultural production for food, income, and as a hobby is a growing trend among United States (US) producers. Laying hens or quail are an economically viable livestock enterprise for small-scale producers with limited resources. In this study, we evaluated the economic feasibility of small-scale egg production (1,000 birds) and compared the profitability under 3 different production systems, and 2 price scenarios. The cost-benefit analysis in this study encompasses calculating and simulating all costs and returns associated with chicken and quail production over a 10-yr period. Two prices were evaluated, farm gate prices that US commercial producers face, and US farmers’ market prices more often faced by small-scale producers. In all 3 production scenarios (chicken with the option of natural molting, chicken without molting, and raising quail) small-scale egg production is economically viable when farmers’ market egg prices were used to calculate the Net Present Value (NPV). Using farmers’ market prices, raising quail has the highest NPV. Raising chickens without molting has the second highest NPV, while raising chickens and allowing them to undergo molting has the lowest NPV. Contrarily, when farm gate egg prices are used in the estimation, only raising quail had a positive NPV. Although the quail enterprise resulted in the highest NPV under both price conditions, there may be marketing difficulties based on the producer's location. Producers located near cities, or Asian populations where quail eggs are more popular may be successful with small-scale quail operations.

Key words: quail, chicken, small-scale, net present value, molting

INTRODUCTION

The poultry industry in the United States (US) is highly diverse, spanning backyard to small-scale to large-scale commercial production. Raising chickens, quail, and other poultry on a smaller scale for food, income, and as a hobby is a growing trend among US residents (Tobinetal., 2015). Approximately 8 million US households had chickens in 2018 (Gibson,2019), with that number rapidly increasing due to COVID (Lesley,2021). While chickens remain the most common poultry among small-scale producers, other game birds, such as quail, are now being raised commercially for their meat and/or egg production. The United States Department of Agriculture (USDA) census data estimated that about 736 million quail were raised in the United States in 2017 (USDA,2019). Raising quail may be a more profitable alternative to chickens due to their higher egg price and salvage meat values. However, quail housing needs differ from chickens, and the purchase price for chicks is higher. In the United States, the average purchase price for chicks is $3 per chicken, while the average price for a quail chick is $4.25 (Hy-LineNorth America,2022; IdealPoultry,2022; JacksonFarms BLRW,2022; KeithSmith Co., 2022; NelsonPoultry Farms,2022). In addition, small-scale producers face marketing challenges for their quail eggs and meat due to the location and population-specific nature of markets for quail products in the United States (Claueretal., 2005).

Potential small-scale producers often face limits when acquiring capital, land, equipment, and labor, but still have an interest in agricultural production (Stokesetal., 2005). However, the demand for quality foods produced locally has expanded, creating market opportunities for small-scale producers (Painteretal., 2015). New farmers’ markets are emerging rapidly across the country, allowing small producers to reach customers directly (Painteretal., 2015). US government support for farmers’ markets has also increased. Farmers’ markets authorized to accept the Supplemental Nutrition Assistance Program are on the rise (Salisburyetal., 2018), increasing the low-income population's access to locally grown and high-quality foods (USDA,2017). The USDA also has direct programs such as the Farmers’ Market Promotion Program (FMPP), which aims to increase access to locally produced agriculture products. FMPP provides direct financial support to agricultural businesses and cooperatives, and producer networks under capacity building projects, and community development training and technical assistance. Through FMPP, the USDA has awarded over $58 million from 2008 to 2015 to support about 879 projects across the country (USDA-AMS,2017). Total funds awarded in recent years have increased significantly, with about $89.44 million awarded between 2017 and 2021.

Although economic analysis of poultry operations has been conducted by past researchers, existing analyses have been mainly focused on large-scale egg production (Painteretal., 2015; Biretal., 2018; Pattersonetal., 2021). There is limited research on the profitability of egg production using other poultry species, such as quail. Quail may have unique marketing challenges, and not every local population will have high demand for quail products; however, it is important to present alternative enterprise options given today's production challenges. Thus, this research will provide economic analysis for small-scale producers who are considering choosing between alternative poultry species, extension professionals who work with agriculturalists, and those interested in the local food supply.

This study evaluated production differences and compared the profitability of raising laying chickens and quail on a production scale of 1,000 birds. The cost-benefit analysis in this study encompasses calculating and simulating all costs and returns over a 10-yr period, then comparing simulated net present values (NPV). NPV is a capital budgeting technique used to discount the projected cash inflows to their present value. It is a common method of evaluating multiple alternatives because it accounts for both the time value of money and the size of the stream of cash flows over the life of the investment (Kayetal., 2016).

Three different egg production scenarios were compared, including 2 chicken scenarios and one quail scenario. Even within traditional chicken egg production, producers can make different production decisions. Natural molting in chickens causes a drastic reduction in egg production, or sometimes a complete break in egg laying, which impacts producer revenue negatively (Berry,2003). Producers can avoid the negative impact of molting if the birds are replaced more frequently, thus preventing the chickens from undergoing molting. However, replacing chickens also increases the production cost for the producer. Therefore, 2 chicken scenarios were considered, one with molting and one without molting. In all 3 scenarios, the main output is eggs with a salvage meat value after the productive life of the bird. The analysis also accounts for variability in both input and output quantity and prices, providing a range of potential financial outcomes with associated probabilities.

MATERIALS AND METHODS

The expected simulated NPV of 2 chicken scenarios, and one quail scenario for a small scale operation was estimated, including 1) raising chickens (layers) and allowing the birds to undergo molting naturally (CWM, thereafter); 2) raising chickens (layers) without molting (CNM, thereafter); 3) raising quail (Quail, thereafter) (Table 1). Fundamentally, the cost that the producer will incur and the corresponding benefits that will accrue from scenarios CWM and CNM are similar, with slight differences. Under the CWM scenario, the producer allows the laying birds to undergo natural molting. Thus, the birds will be replaced every 2 years over the project period. Under the CNM scenario, the producer is expected to replace the birds every year; thus, avoiding the birds’ natural molting process. Under the CWM scenario the producer has lower replacement bird expenses; but, they also have decreased revenue from lower egg production during the molting period.

The quail scenario provides an opportunity for producers to lower their cost of production. This is because quail require less housing space and have a lower feed requirement; but, are prolific layers similar to chickens. Additionally, quail meat and eggs are niche products, commanding higher prices when compared with chicken products. However, depending on the producer's proximity to a larger population, it may be challenging to sell quail products. We are conducting this analysis under the assumption that all products can be sold, which requires the producer to evaluate their individual situation.

RESULTS

Table 5 presents the results from our analysis when farm gate prices are used. In the CWM, the mean NPV is negative $58,330 and has a standard deviation of $3,449. The probability of a positive NPV is 0%. Similarly, in the CNM scenario, the mean NPV is negative $51,476 and has standard deviation of $3,566. The probability of a positive NPV is 0%. In the third scenario where the producer raises quail and accepts farm gate prices, the simulated mean NPV is positive $109,389 and has a standard deviation of $5,036. The probability of a positive NPV for the quail scenario is 100%. Using the farm gate prices, the quail scenario is the only option with a positive mean NPV.

Simulated mean NPVs using the farmers’ market price data were positive in all scenarios (Table 5). In the CWM scenario, the mean NPV is positive $188,843 and has standard deviation of $4,645. The probability of a positive NPV is 100%. Similarly, in the CNM scenario, the mean NPV is positive $216,436 and has standard deviation of $4,850. The probability of a positive NPV is 100%. In the third scenario where the producer raises quail, the simulated mean NPV is positive $327,893 and has a standard deviation of $8,330. The probability of a positive NPV for the quail scenario is 100%. Using the farmers’ market prices, the analysis shows that all the 3 options/scenarios have high positive mean NPVs. However, the third scenario, raising quail has the highest mean NPV.

DISCUSSION

In general, small-scale production of both chickens with and without molting is unprofitable if the producer must sell at commercial/farm gate. This is because small-scale producers do not benefit from economies of scale like large-scale industrialized producers. Quail production on the other hand is economically viable based on simulated positive NPVs even when the producer must sell at commercial/farm gate prices. This can be attributed to the fact that commercial/producer quail prices do not differ much from the reported retail prices at the farmers’ market, or when sold direct to the retailer or consumer. The higher salvage value of the spent hens is another benefit of quail production. When farmers’ market prices are used in the analysis, all mean NPVs are positive. This implies that small-scale egg production is economically viable when producers sell their eggs at farmers’ markets or other higher value direct to consumer markets (Estabrook,2011; Salisburyetal., 2018). An individual producer's ability to be successful is strongly dependent on selling all their product at those higher prices. Market analysis of the demand in any given area, or ability to access larger metropolitan areas needs to be considered before embarking on enterprises that rely on direct-to-consumer sales.

Despite the positive mean NPVs in all scenarios when farmers’ market prices are used in the analysis, raising quail has the highest NPV compared to raising chickens. Similarly, raising chickens and replacing the birds frequently (no molting) has higher mean NPVs than raising chickens and allowing the birds to naturally undergo molting. Thus, raising quail is expected to be a more profitable venture than raising chickens. However, the percentage of small-scale producers that raise chickens is higher than raising quail. As noted by Claueretal.(2005), small scale quail producers need to acquire new and/or necessary production and marketing skills for quail production. Comparatively, many small-scale producers may already have the necessary skill to raise chickens as well as increased availability of resource materials on chicken production.

The main driver of quail profitability is the lower cost of quail production reflected in the less expensive housing and feed requirements. The estimated cost of housing per quail is about $1.00 per year while it will cost the producer about $1.70 per chicken per year. Similarly, the cost of feeding an adult chicken (layer) is also significantly higher than the cost of feeding an adult quail. In our estimation, the weekly cost of feeding an adult chicken (layer) is 44% higher than the weekly cost of feeding an adult quail (20 cents). Research has shown that since 2002, the use of corn in production of ethanol and other biofuels has put upward pressure on feed prices for livestock and poultry, the cost of poultry feed increased from 30 to 70% of the total cost of production (Donohueand Cunningham,2008). Therefore, it is likely that an alternative poultry enterprise which requires significantly less feed but is as productive as chickens will be more profitable if a market for the eggs/spent birds exists.

In comparing the chicken production options only, allowing the hens to undergo natural molting is less profitable compared to raising chickens without molting. The additional costs associated with raising chickens with no molting are the cost of purchasing day-old-chicks and the extra cost of labor associated with raising additional chicks. In our estimation, over the 10-yr period, the option of replacing the chickens every year instead of replacing them after 2 yr, will cost an additional $15,600, and result in additional labor costs of $7,540. We assumed replacing the chickens every year will require an additional 2 h per week in labor associated with chick rearing. However, these additional costs have associated benefits from the continuous egg production throughout the year. In this research, we assumed complete cessation of egg production during the 8 wk of molting, which translates to additional revenue of about $47,616 on average using farm gate prices in the non-molting scenario over the course of the project.

Throughout the analysis, it is apparent that the price at which the small-scale producer can sell their eggs is critical in determining the viability of the enterprise. For example, for both chicken scenarios, the mean NPVs only became positive when farmers’ market prices were used in the analysis. Whereas farmers’ market prices present enormous opportunity to the farmers, it is not without challenges. First, farmers’ markets are only in a few locations. Thus, depending on the location of the farm, the producer might incur additional cost (labor and/or transportation) which can reduce the NPV of the project. Second, some farmers’ markets also require expensive licensing, and have fees for selling. All these factors can result in a lower NPV based on individual circ*mstances.

Additionally, for the quail enterprise, depending on consumer preferences near the producer it may be difficult to sell all of the eggs and spent birds produced. It was also assumed that quail farm gate prices and farmers’ market prices were similar. If commercial quail production were to increase, farm gate prices would likely decrease. However, based on previous literature, there would likely still be a premium for farmers’ market quail eggs. Another important note is that the market for quail eggs is likely to be less stable than for chicken eggs. Chicken eggs are a commonly consumed and popular product in the United States. It is unclear what future demand for quail eggs will be. Producers should be aware of the demand for quail eggs in their geographical area before starting a quail enterprise. Saturation of the market could occur if several quail egg producers enter the same region and begin competing at the local farmers’ markets and other direct to consumer outlets. However, US tastes and preferences are continuously changing. Future research is needed to determine regional demand for quail eggs, and to project future consumption trends.

CONCLUSIONS

In this study, we evaluated the economic feasibility of small-scale egg production and compared the profitability under 3 different production scenarios. We found that in all 3 production scenarios (chicken with the option of natural molting, chicken with the option of no molting, and raising quail) small-scale egg production is economically viable when farmers’ market egg prices were used to calculate the NPVs. Using farmers’ market prices, raising quail had the highest NPV. Raising chickens without molting had the second highest NPV while raising chickens and allowing them to undergo molting has the lowest positive NPV.

In contrast, when commercial/farm gate egg prices were used in the estimation, only the third scenario; raising quail had a positive NPV. Commercial/farm gate egg prices are low for chickens. Commercialized producers are able to reduce their cost of production through economies of scale, and can remain profitable despite lower egg prices. Therefore, it will be unprofitable for small-scale chicken producers to sell at the same price. However, quail egg farm gate prices do not differ much from their retail prices. Consequently, when small scale producers sell their quail eggs at commercial/farm gate prices, they will still be able to make profit.

In our analysis, quail production has a higher probability to be more profitable than chicken production. However, prior to starting quail egg production, the producer must thoroughly research possible markets for their products. Demand for quail eggs is location specific. Due to the above reasons, further research on developing marketing plans for these different production operations is recommended. Additionally, quail production has unique challenges. Producers may need additionally support from extension publications and classes to be able to successfully raise the less traditional quail.

ACKNOWLEDGMENTS

Footnotes

¹One ton is equivalent to 2000 lbs.

REFERENCES