Going out of business?
Posted on September 23rd, 2011
At the beginning of the year, Walker County poultry farmer Dorman Grace had six large poultry houses and was producing about 400,000 chickens each year.
In January, an ice storm took down one of the 40-foot by 400-foot barns. The April 27 tornadoes demolished three more.
“It was a significant blow,” said Grace, a third-generation poultry grower, about the impact it had on his business. “But we were blessed. We had neighbors who lost their houses and other farmers lost their lives. We just had a mess to clean up.”
Grace is now one of an estimated 170 to 200 Alabama poultry producers recovering from tornado damage. And some, like Grace, are opting not to rebuild.
“Most of them are getting ready or are back in production,” said Dr. Tony Frazier, state veterinarian with the Alabama Department of Agriculture and Industries. “There were a few farms that were going out of business.”
Grace’s buildings, a few of which he built more than 30 years ago, were insured. But insurance would only cover a portion of the $600,000 needed to rebuild two larger, more efficient structures. At age 55, replacing the four poultry houses is a bigger commitment than Grace is willing to make.
“Once you build a poultry house, it’s a poultry house,” Grace said about the use-specific structures. “You can’t use it for anything else. You can’t change it into a greenhouse.”
About 3 million chickens were killed in the April tornadoes, but in a state that sells about 22 million a week, that wasn’t a huge economic impact carried on to consumers, Frazier said.
But for the individual growers with damaged houses, the impact was significant.
About 200 poultry barns were destroyed and another 500 received moderate to severe damage.
“Some (growers) lost as many as five houses, some just had damage to one house,” said Ray Hilburn of the Alabama Poultry and Egg Association.
Removing the demolished structures was a timely, and costly, process. Hilburn said some farmers spent $20,000 to $30,000 on clean-up.
“We’re still in the process of helping (the Federal Emergency Management Agency) to understand the needs of the poultry grower,” Frazier said.
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He said the state’s emergency management responders were “phenomenal.”
“But we still have a little learning curve to get through with FEMA,” he said. “We want to help bridge that gap and work with farmers to make the cleanup go a little smother next time.”
Grace was told that having his demolished barns accepted at a landfill would cost $27.50 per ton. Insurance would pay 10 percent. “It would have been several thousand dollars,” he said. In the end, he salvaged the metal and buried the rest on his farm.
Increased costs probably have farmers thinking twice about their futures in the industry. Insurance premiums, diesel fuel, feed and propane to heat the barns in the winter have all increased in cost.
“We have had some rate increase in recent years,” said Jeff Helms, a spokesman for Alfa Insurance. “But relative to the economy, the price of poultry housing insurance has not gone up that much.”
Helms said the insurance industry has seen “rate pressure” on poultry houses and other types of property. He attributes that in part to not just the April tornadoes, but a marked increase in the number and severity of storms in the state in recent years.
In addition, poultry houses, which are often built in close proximity to each other, have become larger, more efficient and more expensive.
“Both of those things are impacting the farmer,” Helms said.
Instead of rebuilding those houses, Grace is growing row crops. Instead of buying corn at increasing prices to feed his chickens, he will now sell it.
“If I was 35-years-old, I would look at it differently,” said Grace, who’s two sons are studying agriculture at Auburn University. “But things are changing in agriculture, and we are excited about row crops.”
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