Iowa egg industry adds value

AGRICULTURE plays an important role in the U.S. economy, as do each of the various segments of the industry. Likewise, agriculture and its segments play important roles in the economies of most states.

A good example is the importance of the Iowa egg industry to Iowa's economy, according to an analysis by economists Dan Otto, Maro Ibarburu and Lee Schulz at Iowa State University.

The Iowa egg industry is the largest in the U.S., producing more eggs than the second- and third-largest egg-producing states -- Ohio and Pennsylvania -- combined, according to the study.

Iowa was the largest egg production state until 1958, when production began shifting to integrated complexes in the southern U.S., but it regained its title in 2001 as production shifted back to the Corn Belt, with its less expensive and more readily available corn supply.

In 2011, the Iowa industry had 52.9 million layers that produced 1.2 billion doz. eggs (14.5 billion eggs), the study found, and until recently, it was the fastest-growing egg industry, with production expanding 150% in the 10 years leading up to 2006.

(Growth in production has slowed in Iowa and across the country in recent years due to increasing feed costs  as well as to uncertainty over the kind of hen housing systems producers should adopt, the analysis notes.)

A number of factors account for Iowa's fast-growing production and number-one ranking, the study found.

First, U.S. egg consumption increased from 234 eggs per person per year in 1991 to 258 eggs in 2006, decreased in 2007-08 and leveled off at approximately 246-248 eggs for the last four years.

Second, compared to producers in states outside the center of the Corn Belt, Iowa producers have a competitive advantage due to their access to inexpensive feed, which accounts for 67% of the cost of production.

Third, Iowa producers have seized on the increasing trend to "break" eggs to make egg products such as dry and liquid mixes that can be transported to major population regions on the West and East coasts less expensively than shell eggs.

Processed products also are used by food manufacturers that tend to be located closer to suppliers, which further benefits Iowa producers.

Egg processing has indeed increased: In 1983, 13% of egg production went to breaking plants, and today, 31% of production goes to breaking plants. On a per-person basis, shell egg consumption decreased 25% from 1983 to 2011, while egg consumption in the form of processed products increased 118%.

As demand increases and hen housing questions are answered, the Iowa egg industry should be in a position to continue to expand as these advantages "are relatively stable," the analysis says.

Accordingly, the Iowa egg industry has grown significantly over the last two decades, the study found, with layer numbers increasing 9.0% per year since 1990. In addition, egg production has risen 9.7% per year, and the state's share of U.S. production has increased from 3.0% in 1990 to 15.7% today (Figure).

Economic 'linkages'

The growth of the egg industry in Iowa has occurred primarily via integrated, "in-line" production complexes in which eggs are moved on conveyer belts directly into plants, where they are cartoned and/or processed and shipped directly to customers.

Although some producers have brands, producing and marketing shell eggs is generally considered a commodity activity, and egg processing is considered a value-added activity.

However, the market value of both activities in Iowa in 2011 totaled $1.069 billion, according to the study.

The industry growth and the value of production and processing are "positive employment news" for rural Iowa, the analysis says, pointing to 3,748 jobs that generated $155.8 million in salaries and wages in 2011.

The egg production and processing components are considered the core of Iowa's egg industry, the analysis notes, but its "backward linkages" include suppliers of feed grains, feed supplements and veterinary and utility services.

In 2011, Iowa egg producers used 49.2 million bu. of corn and 452,200 tons of soybean meal valued at $579.5 million, with costs for other inputs and services totaling $250.2 million.

The "forward linkages" generate economic effects beyond the egg farms and plants since income from the core sectors "spills over and impacts the rest of the regional and state economy," the analysis says, and "successive transactions (can be) summed to provide an estimate of direct effects, secondary indirect and induced effects and total effects of the event," i.e., the total economic impact of production and processing.

These effects can be calculated using the IMPLAN input-output (I-O) model that was developed by the U.S. Forest Service and currently is maintained by the Minnesota IMPLAN Group. The model is widely used by economists to estimate economic impacts.

In their study, the Iowa State economists assigned the income resulting from jobs in production and processing and the total value of eggs and egg products -- $1.069 billion -- as direct inputs into the I-O model, which stimulated successive transactions, or model outputs, resulting in the total economic activity of the event.

The I-O activity is show in the Table. When all direct and secondary effects are considered, the Iowa egg industry is responsible for 7,960 input and output jobs, $424.1 million in income, $2.024 billion in output sales and a $656.6 million contribution to Iowa's gross domestic product (GDP), the study concluded. Furthermore, the Iowa egg industry is responsible for $19.3 million in state tax revenues per year.

The complete analysis is available at www.iowaegg.org.

Volume:85 Issue:16