Key Insights and Reflections on the Egg Industry from a Veteran Egg Researcher with Over a Decade of Experience​

For those exploring ​how to start chicken eggs business, it is essential to understand the following industry realities:

1. As the layer farming industry transitions from labor-intensive to capital-intensive operations, this shift will inevitably lead to a mean reversion in breeding profits and intensified cost-control competition among leading enterprises.
2. While the common expectation during industry consolidation is more stable cash flow and returns, the often-overlooked reality is that this stability is achieved through a brutal process—the industry must first undergo a thorough reshuffle.
3. In cyclical industries facing capital surplus, there is a tendency to pursue diversified revenue streams. However, the most valuable profits remain those derived from understanding and leveraging the cycle. The valuation peak for such industries occurs when one year’s profits exceed the cumulative profits of the past twenty years.
4. The essence of the layer farming business lies in generating three types of profit: capital appreciation through feed inventory, plant-based protein conversion efficiency, and scarcity-driven supply premiums. Egg production is fundamentally a process of feed ingredients multiplied by industrial conversion efficiency (feed-to-egg ratio). Therefore, from a cost perspective, profits originate from two sources: (1) differentiated feed pricing and farming technology, and (2) strategic timing in replenishing flocks and culling based on supply scarcity.

An interesting observation: when industry competition reaches its peak, it is often the leading companies that first advocate for cost reduction and efficiency improvement. Followers then desperately slash various expenses, only to find that unit costs remain unchanged while they suffer permanent market share losses. While cost reduction and efficiency improvement have positive implications, we must clarify which is more critical: Can you reduce the feed-to-egg ratio from 2.1 to 1.8? However, reducing feed costs by 20%–30% is feasible, and feed costs account for 70% of total farming expenses. Feed prices have risen from below ¥3/kg to a peak of ¥3.7/kg, a 24% increase.

Layer feed formulations generally consist of approximately 65% energy ingredients (corn, sorghum, wheat bran) and 25% protein ingredients (soybean meal, peanut meal, corn, cottonseed meal). Consider two datasets: the standard deviation of corn prices over the past decade is 0.34, while soybean meal’s is 0.52. The correlation coefficient between feed price and corn is 0.97, and with soybean meal, it is 0.83. Thus, while more money is spent on corn in feed costs, cost savings require a focus on soybean meal due to its higher volatility.

We also calculated: a layer consumes approximately 34 kg of feed over its 500-day lifespan. With an even age structure, every 10,000 layers consume 920 kg of feed daily and 336 tons annually. For every 100,000 layers, a farm consumes roughly 1,880 tons of corn and 670 tons of soybean meal yearly. A farm with 1 million layers incurs annual feed costs of approximately ¥70–80 million, representing about 70% of the total investment for such an operation. Hence, this cost cannot be overlooked.

Broadly speaking, the proportion of feed usage for layers in 2024 is lower than during the same period in 2020 and 2021. Guizhou, Chongqing, Zhejiang, and Henan have contributed significantly to the growth in feed usage, reflecting industrial relocation. A key conclusion is that the correlation between feed demand and farming profits is far greater than its correlation with flock size.

​The Chinese Model for the Layer Industry:​​
China’s aging population is accelerating, simultaneously making family-scale layer farming a less attractive career option for farmers. Increasing environmental regulations also raise operational costs and entry barriers. Market concentration is an inevitable trend. Currently, shell egg consumption for household use remains the dominant form of egg consumption in China, with processed eggs accounting for less than 5%. Among processed egg products, 80% are traditional reprocessed eggs, such as preserved, salted, or pickled eggs, while less than 20% are used for liquid egg and egg powder processing. China’s egg industry has its unique development model, but the pathways to achieving agricultural product premiums are grading and channel differentiation:

• Nutrient-enriched eggs (Omega-3, selenium-rich)
• Safe-for-raw-consumption eggs
• Cage-free eggs

​Reflections on Timing for Flock Replenishment:​​

1. Periods of crisis, such as June-August 2013, March-June 2020, and February-June 2017, became significant drivers for the next wave of farming profitability. Industry panic allows astute players to profit from both cyclical reversals and sharply lower costs, such as for chicks, during fearful periods.
2. Risk warning signals often manifest as rising chick prices and increased volume during high-profit periods—times that warrant vigilance.
3. Cyclical industries inherently profit from strategic gameplay, underlying logic consistent with futures investing—a few well-timed, significant decisions on flock replenishment and molting constitute the primary source of individual wealth. This strategic approach is a critical consideration for anyone learning ​how to start chicken eggs business.

This analysis provides a foundational understanding for those evaluating ​how to start chicken eggs business, highlighting the economic and operational realities of modern egg production.