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AUBURN, Feb, 5---Rising propane costs, coupled with a much colder than normal winter, are causing the state's poultry growers significant problems. The high fuel costs are cutting into potential profits and growers are looking for ways to handle the steep increases.

But the high prices are having no impact on one group of poultry producers. More than 50 area poultry growers in the Franklin County area locked in their price for propane last summer.

Dr. Tim Reed, Franklin County coordinator for the Alabama Cooperative Extension System, says this is the third year farmers working as a group have booked their propane purchases early.

The number of farmers participating has grown from 35 farmers in 1998 to 56 this year.

Those 56 farmers represent almost a third of all broiler producers in Franklin County.

"We locked in a price of 80 cents a gallon last summer," said Reed. "Now there are producers paying $1.35 a gallon and I've heard reports of people paying as much as $1.70 a gallon."

A single poultry house in north Alabama uses an average of 4000 gallons of propane a year. Growers that are paying 80 cents per gallon have saved a minimum average of 10 cents per gallon for fuel purchased through January compared to farmers who did not obtain fuel price protection.

Farmers in this program saved more than $200,000 in 1999.

Dr. Gene Simpson, an Extension agricultural economist, hopes the high cost facing Alabama's poultry farmers is a short-term one.

"Poultry farmers grow their birds on contract with larger companies. The companies supply the chicks and the feed while producers furnish houses, labor and the utilities." says Simpson. "The growers' biggest area of risk is in utilities — gas and electricity. Gas amounts to about 40 percent of the growers' out of pocket expenses in normal years. This year, it is 55 to 60 percent.

"If utility prices jump, it impacts producers' profits. Propane prices running this high could slash some growers' net returns between 20 and 35 percent."

Reed points out that some poultry farmers who are still making mortgage payments on their houses do not have any money left from their flock payment after their fuel bill and other bills are paid.

Unlike many businesses who pass increased costs to consumers, poultry farmers cannot do this. They raise birds under contract at a specific price.

Simpson says this crisis potentially could drive some farmers out of business.

While Simpson acknowledges that contracting for propane early is benefiting producers in Franklin County, he says there are some potential difficulties.

The savings this year could become a drawback when it's time to negotiate the next year's contract.

"With prices running around $1.35 or more, most propane companies will be reluctant to book a price less than that. That might be a good price if the price continues to rise, but if the price drops, farmers will be stuck paying a contract price higher than actual market price," says Simpson.

Reed acknowledges that is a risk. But he says based on the current July propane futures contract price of 55 cents per gallon, he is hopeful farmers will be able to book propane this summer for 80 cents per gallon from large propane companies.

Simpson adds that many poultry producers can reduce propane costs by improving the efficiency of their chicken houses, thus reducing the quantity of propane required to heat the house. A one-eighth-inch uncaulked crack along both walls of a typical poultry house is equivalent to a 10 square foot opening.

Extension poultry scientists and agricultural engineers working with researchers at Auburn University are developing a variety of methods to improve the heating and cooling efficiency of chicken houses.

Dr. Tim Reed, Franklin County Extension Coordinator, (256) 332-8880