Poultry Risks Need Insurance

While the debate continues over which came first, both the chicken and the egg are in danger of leaving sooner than expected every time a strong wind or heavy snow hits the farm.

Northwest Arkansas chicken farmers have enjoyed an 11-year, catastrophe-free stretch. But the possibility of the walls tumbling down and severely crippling family businesses remains a constant threat.

In January, 17 Arkansas counties — particularly Tyson Foods Inc. complexes in the Grannis and Nashville areas of southwest Arkansas — suffered severe ice storm damage. Northwest Arkansas has avoided multiple catastrophes since 1989.

A standard poultry house today will cost between $130,000 and $150,000 to build and hold anywhere from 20,000 to 25,000 birds. And the average poultry farm has four houses.

Following the January ice storms, the Natural Resource Conservation Service released a record $2.8 million to aid Arkansas poultry growers to repair the destruction left behind. That figure was supplemented when Gov. Mike Huckabee declared 29 counties a disaster area, prompting further federal relief. And the federal Farm Service Agency allowed farmers in the affected counties to qualify for low-cost federal loans.

No such relief was given to poultry farmers affected in Northwest Arkansas in a 1989 snow and ice storm that leveled about 400 chicken houses.

An estimated 10.5 million chickens were killed and over 300 houses were destroyed in January.

Tyson also came to the rescue of some of its farmers.

“What we did for the ones that were damaged was paid the growers for the time the birds were in their houses,” Tyson spokesman Ed Nicholson said. “We consider each case with its losses and the circumstances surrounding them. If it was something that was unavoidable, we do our best to make it right and minimize their losses.”

Most poultry houses less than 20 years old are insured. Some of the much older houses were not insured when they were built and today cannot be insured due to their fragility.

“Most of the [poultry house policies] we write the companies have a replacement cost if they have to rebuild them,” said Gary Jech of Farris Insurance Agency in Springdale. “If they’re not rebuilt, the farmers are paid the house’s actual cash value, which takes into effect the depreciation of the house.”

No integrator — Tyson, Simmons Foods Inc., etc. — can force their farmers to have insurance on the houses. The farmers are all independent contractors using their own property. The growers/farmers supply the labor, facilities and pay the utility bills. The integrator supplies the birds, feed and necessary medication.

“We do have certain standards that [farmers] have to have,” said Doug Siemens, a spokesman for Simmons Foods Inc. in Siloam Springs. “But there are forces of nature that can happen. A lot of the older houses in Northwest Arkansas in the late 80’s got pretty much hammered by the snow and ice. A lot of the newer houses, even at that point, were built with stronger trusses. We have standards on how the houses should be built, and the construction companies know that. The farmer is making a significant investment. They want to make sure the house stays solid.”

The integrator can demand particular equipment, such as generators to avoid prolonged power outages in locations prone to heat losses with chickens.

Fred Stone of Rebsamen Insurance in Springdale said coverage varies from farmer to farmer, depending on such factors as insuring the house, loss of income with birds dying, mechanical breakdowns, etc.

“Some of [the coverages] may have larger deductibles,” Stone said.

Ivan Berry, professor emeritus in the department of biological and agricultural engineering with the University of Arkansas, said that while the care for the chickens and cost efficiency has been upgraded over the years, the structural safety could stand some serious improvement.

Chicken houses costs about $5 per square foot to build, and are built with no partitions to strengthen them. The houses are built with L-shape angles, which are not as strong as I-beams. But the I-beams are simply too costly.

“When snow accumulates on the roof, the insulation causes it not to melt as fast, and if a heavy enough amount is involved, eventually they collapse,” Berry said. “They’ve got to be designed a little better.”

Berry, Raymond Benz, John Langston and Warren Harris have been perfecting energy efficiency strategies for chicken houses ever since the Department of Energy handed out refunds through the state in the late 1980s. That’s when fines were levied against oil companies for overcharging customers.

Arkansas elected to use some of that refunded money for the poultry industry since it was a large user of energy. The UA poultry science department then built four houses for research purposes at its broiler farm in Savoy. Two were built conventionally ventilated and two were built totally ventilated.

Prairie Grove-based LATCO is considered one of the top poultry house builders anywhere.

“LATCO’s houses are so well architecturally designed that they aren’t going anywhere,” Stone said.