Study shows ‘chicken industry is a competitive and thriving sector’

Study shows ‘chicken industry is a competitive and thriving sector’

By Stewart Doan

© Copyright Agri-Pulse Communications, Inc.

Washington, May 21 – Competition is alive and well in the broiler industry and benefits chicken farmers, poultry companies and consumers according to an industry-funded study.

“On the national scale, it is the overall conclusion of this study that the chicken industry is a competitive and thriving sector,” wrote ag economist Dr. Thomas Elam, president of FarmEcon LLC. “Intense competition among chicken companies leads to product innovation and lower prices for consumers.

Production and consumption of chicken has grown almost every year since the 1960s.

Elam’s study was commissioned by the National Chicken Council, which represents chicken producer-processors, and released in advance of Friday’s U.S. Departments of Agriculture and Justice workshop on competition issues in the poultry industry at Alabama A&M University in Normal, Alabama.  Agriculture Secretary Tom Vilsack and Attorney General Eric Holder are scheduled to attend. The daylong conference will feature roundtable discussions on poultry grower issues and production trends.

The vertically integrated system, in which a single company owns or controls virtually all phases of the operation, also benefits the independent family farmers who raise chickens under contracts with the companies, asserted Elam.

“Contract growers are insulated from integrator margin risk by fixed price contract terms. They receive payments that are not tied to market variations in prices of chicken and feed,” the study said. “These risks are largely shifted to the integrator, who absorbs the financial losses from adverse weather, general disease outbreaks, feed quality, and other factors potentially adversely affecting live chicken performance.”

As to whether contract growers are satisfied with vertical integration, Elam observed that many chicken companies have waiting lists of people who want to become contract growers, and lists of farmers already in the business who want to expand their operations.  “This shows that growers can earn a good return on their investments,” he said.

The study concludes that the broad powers granted USDA’s Grain Inspection Packers and Stockyards Administration (GIPSA) to regulate poultry contracts should be sufficient to remedy legitimate issues for either growers or integrators. 

However, if GIPSA regulations were to become excessive and burdensome, Elam predicted that “integrators at some point will very likely begin to abandon contracting and convert chicken growing facilities to company-owned operations.”

The study is available online at www.nationalchickencouncil.com

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