Pig/Poultry Industry Structure

Question 1

Total poultry sector sales

Answer 1

$76.9 billion

Question 2

____ of US chicken raised under production contracts

Answer 2

96%

Question 3

Vertically integrated def

Answer 3

Tying together the control or management of two
or more stages in the production of a single
commodity anywhere between the farm supplier
and final retail, exclusively

Question 4

Integrator def

Answer 4

A company (poultry) that owns the animals
throughout the growing process through harvest.

Question 5

What do integrators do

Answer 5

Dictate feed, transportation, veterinary care,
marketing, and grow – out management
* They take on the risk

Question 6

What does a grower do

Answer 6

Contracts to grow animals according to Integrator
specifications. May or may not own land, buildings or animals

Question 7

______ and (especially) ______ production have
developed into vertically integrated industries

Answer 7

Swine; poultry

Question 8

Other exs of vertical integration

Answer 8

Grocery store (retail sale of food and produces and transport of its own brands of food), phone, entertainment

Question 9

What does an integrator own

Answer 9

Feed mill, breeder farm, hatchery, transport, and processor

Question 10

For actual chicken production, the ____ enters into a contract with a _____

Answer 10

Integrator; grower

Question 11

Marketing contract

Answer 11

Producer agrees to sell a set # of animals to processing facility at a set time for a set price

Question 12

Where are marketing contracts still seen?

Answer 12

Swine operations

Question 13

Who are the animals owned by in a marketing contract?

Answer 13

Producer

Question 14

Production contract definition

Answer 14

Producer (grower) agrees to produce animals for the integrators according to standards set by the integrator

Question 15

Where are production contracts seen?

Answer 15

Much of swine production and 100% of broiler production

Question 16

Who are animals owned by in a production contract?

Answer 16

Owned by integrator

Question 17

Why is a grower entering a contract?

Answer 17

To produce the chickens for the integrator

Question 18

In a production contract, the grower provides…

Answer 18

Housing/equipment, husbandry/labor, manure management

Question 19

Chicken barn cost

Answer 19

$9-$10/sq. ft

Question 20

Space

Answer 20

~0.8 sq. ft./bird

Question 21

Older style house

Answer 21

40 ft X 400 ft (16k sq. ft.)

Question 22

New style house

Answer 22

54 ft X 600 ft (32.4k sq. ft.)

Question 23

What is width limited by?

Answer 23

Ventilation

Question 24

How much money is $10/sq. ft?

Answer 24

$160k to $324k

Question 25

How does a grower get paid?

Answer 25

Detailed in contract, usually a base/guaranteed payment (e.g. sq. ft)

Question 26

How does a grower get paid?

Answer 26

Premium payments which can be based on a number of factors

Question 27

Different premium factors

Answer 27

Total weight of birds, number raise, number condemned, feed conversion rate

Question 28

How do growers get paid?

Answer 28

Sometimes paid based on how you compare to other growers (competing with other growers in a cohort

Question 29

How do growers get paid?

Answer 29

It depends on contract, performance, how many chickens/building you have

Question 30

Pros of contract production

Answer 30

Decreased risk in some cases (risk is spread across different entities), significantly less initial investment, small number of houses can improve household income and provide opportunity for family members

Question 31

Cons of contract production

Answer 31

Integrator may control ability to expand (may not want more chickens or can't produce chickens for two integrators)

Question 32

Other cons of contract production

Answer 32

Can be imbalance in negotiations, must adhere to integrator housing standard- could require reinvestment

Question 33

Until recently, most swine farms were ________

Answer 33

Farrow to finish operations

Question 34

These farrow to finish operations used __________ contracts to sell their pigs

Answer 34

Marketing

Question 35

Contract production for swine is based on ______ market

Answer 35

Futures

Question 36

Marketing contract guarantees

Answer 36

Market, price

Question 37

Marketing contract avoids...

Answer 37

Market volatility (Real price increase or decrease = no change in producer payment)

Question 38

Swine production has developed into an industry that looks very ______to poultry production

Answer 38

Similar

Question 39

The majority of new swine farms are not ___________

Answer 39

Farrow to finish

Question 40

The majority of new swine farms are ________ operations

Answer 40

Grower/finisher operations

Question 41

New swine grower/finisher operations enter into _________ contracts with a larger integrator similar to what is seen in poultry production

Answer 41

Production

Question 42

In these production contracts for swine, _____ pigs are received and they grow until ____ ______

Answer 42

Weaned; market weight

Question 43

Who owns most swine in the US?

Answer 43

WH Group Smithfield, Pipestone Systems, Triumph Foods, Seaboard Foods, Iowa Select, The Maschhoffs, Prestage Farms

Question 44

Who owns the most pork in the US? Percentages?

Answer 44

WH Group (Smithfield) -26% Tyson Foods - 24% JBS USA Holdings - 24% Cargill - 13%

Question 45

The US poultry industry is

Answer 45

100% vertically integrated, consolidated, has very short production cycles

Question 46

Do the qualities of the poultry industry allow it adapt quicker than other meat-animal industries?

Answer 46

Yes

Question 47

Monopoly definition

Answer 47

One seller of good

Question 48

Monopsony definition

Answer 48

One buyer of good