John Anderson, agricultural economist with the Mississippi State University Extension Service, said production costs have soared to historic levels because of high feed prices and climbing diesel fuel prices.

“The biggest factor facing poultry and other livestock industries is record-high feed prices. We have never been in a feed-price situation as difficult as this,” Anderson said.

The cost of corn, which is the main grain used in chicken feed, is about $5.75 per bushel, a $2 increase since a year ago. While corn has been on the rise for more than a year, the cost of other feed ingredients also is going up.

Craig Coufal, Extension poultry specialist, said corn and soybean meal make up about 85 percent of a chicken’s diet. Other ingredients include animal and vegetable fats, vitamins and minerals, limestone, salt and amino acid supplements.

“A shortage of grains in the world market caused by drought and crop failures in other countries has driven up ingredient prices,” Coufal said. “The production of biofuels also has contributed to the increase. Much of the corn supply over the last year or two has been used for the production of ethanol. These factors led farmers to plant more corn instead of other grain crops like soybeans, resulting in a lower supply of soybeans.”

Diesel prices also have forced poultry production costs to rise.

“Nearly everything that moves in the poultry industry, whether it is chicks, eggs, feed or bedding material, is transported by trucks fueled by diesel,” Coufal said.

A monthly agriculture price report released by the U.S. Department of Agriculture indicated the April price for untaxed farm diesel was $3.62, an increase of $1.19 per gallon from a year ago.

“That is the diesel fuel the growers use in their tractors on their chicken farms. The poultry and egg companies use highway diesel in their transport trucks, which is even higher in price than the farm diesel,” he said.

As a result of these historic production costs, Anderson expects an overall decrease in broiler production by the end of the year.

According to the USDA April livestock, dairy and poultry outlook report broiler production rose the first quarter of 2008, but Anderson said this increase reflected the significant decrease at this same time last year.

“The only response livestock producers have to these high costs is to reduce production or try to increase demand to cover costs. Demand for poultry is already good, so the only other thing to do is scale back production,” Anderson said.

The price of chicken at the grocery store has remained low due to a large supply. However, Coufal said this has not been the case with eggs, causing consumers to pay more than $2 a dozen during the first quarter of this year.

“Egg producers are faced with the same high production costs as broiler producers, but they are more profitable at this time,” Coufal said. “The difference is that egg supply has not surpassed demand as much as chicken meat has. There are fewer laying hens in production in the United States as a result of new animal welfare guidelines requiring fewer hens per cage.”

Anderson said all livestock industries are dealing with similar economic situations.

“Several things will have to change before these prices come down, but there is no indication that they will. Poultry producers should expect to see high fuel prices and high feed prices all year,” Anderson said.