I thought about digging out some of the dirt and replacing it with sand but I’d really like to hear from the pros on resolving my issue.
I live on a lake, but I won't use sand in my setup. Sand gets messy and wet and required constant cleaning, for me, anyways. It always smelled bad if not removed and replaced. Lots of work.
Consider adding in dry leaves, grass clippings, and other different particle sized stuff to your pine needle floor.. it invites more beneficial bugs and bacteria to the party.
Yes, that it also what I would suggest. Add to that list wood chips if you can get them for free, or make your own with a chipper at home. Adding more inches of diverse material would be my first choice.
We’ll I have tons of oaks on my property and an endless supply of leaves but I’ve read oak it toxic to chickens. Any comment on that ?
I have never heard of oak leaves being toxic to chickens. I have oak leaves mixed in with all my grass clippings, wood chips, pine needles, etc... and have never found anything toxic to the chickens.
Should I add more pine needles or is a few inches enough
You can add more pine needles, but I would also encourage you to add more of the other materials as well. A diverse litter has many advantages over a single type of material for your chicken run.
What do you mean the chickens are filthy? Chickens bathe in dirt and then shake it out of their feathers.
Yep. Chickens will dust bathe, so you have to learn to live with that. I have a White Californian chicken that looks more grey after a good dust bathing.
My white Leghorns are getting black
It's only temporary. Don't get upset that the chickens are taking care of themselves. Unless you are taking them to a show, I would not be concerned about them looking 'filthy' after they dust bathe.
Also, I have found that when the pullets get older, they preen themselves clean better. Is it just my belief that pullets resemble human teenagers in that respect?

