Pig/Poultry Industry Structure Flashcards
Total poultry sector sales
$76.9 billion
____ of US chicken raised under production contracts
96%
Vertically integrated def
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
Integrator def
A company (poultry) that owns the animals
throughout the growing process through harvest.
What do integrators do
Dictate feed, transportation, veterinary care,
marketing, and grow – out management
* They take on the risk
What does a grower do
Contracts to grow animals according to Integrator
specifications. May or may not own land, buildings or animals
______ and (especially) ______ production have
developed into vertically integrated industries
Swine; poultry
Other exs of vertical integration
Grocery store (retail sale of food and produces and transport of its own brands of food), phone, entertainment
What does an integrator own
Feed mill, breeder farm, hatchery, transport, and processor
For actual chicken production, the ____ enters into a contract with a _____
Integrator; grower
Marketing contract
Producer agrees to sell a set # of animals to processing facility at a set time for a set price
Where are marketing contracts still seen?
Swine operations
Who are the animals owned by in a marketing contract?
Producer
Production contract definition
Producer (grower) agrees to produce animals for the integrators according to standards set by the integrator
Where are production contracts seen?
Much of swine production and 100% of broiler production
Who are animals owned by in a production contract?
Owned by integrator
Why is a grower entering a contract?
To produce the chickens for the integrator
In a production contract, the grower provides…
Housing/equipment, husbandry/labor, manure management
Chicken barn cost
$9-$10/sq. ft
Space
~0.8 sq. ft./bird
Older style house
40 ft X 400 ft (16k sq. ft.)
New style house
54 ft X 600 ft (32.4k sq. ft.)
What is width limited by?
Ventilation
How much money is $10/sq. ft?
$160k to $324k
How does a grower get paid?
Detailed in contract, usually a base/guaranteed payment (e.g. sq. ft)
How does a grower get paid?
Premium payments which can be based on a number of factors
Different premium factors
Total weight of birds, number raise, number condemned, feed conversion rate
How do growers get paid?
Sometimes paid based on how you compare to other growers (competing with other growers in a cohort
How do growers get paid?
It depends on contract, performance, how many chickens/building you have
Pros of contract production
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
Cons of contract production
Integrator may control ability to expand (may not want more chickens or can’t produce chickens for two integrators)
Other cons of contract production
Can be imbalance in negotiations, must adhere to integrator housing standard- could require reinvestment
Until recently, most swine farms were ________
Farrow to finish operations
These farrow to finish operations used __________ contracts to sell their pigs
Marketing
Contract production for swine is based on ______ market
Futures
Marketing contract guarantees
Market, price
Marketing contract avoids…
Market volatility (Real price increase or decrease = no change in producer payment)
Swine production has developed into an industry that looks very ______to poultry production
Similar
The majority of new swine farms are not ___________
Farrow to finish
The majority of new swine farms are ________ operations
Grower/finisher operations
New swine grower/finisher operations enter into _________ contracts with a larger integrator similar to what is seen in poultry production
Production
In these production contracts for swine, _____ pigs are received and they grow until ____ ______
Weaned; market weight
Who owns most swine in the US?
WH Group Smithfield, Pipestone Systems, Triumph Foods, Seaboard Foods, Iowa Select, The Maschhoffs, Prestage Farms
Who owns the most pork in the US? Percentages?
WH Group (Smithfield) -26%
Tyson Foods - 24%
JBS USA Holdings - 24%
Cargill - 13%
The US poultry industry is
100% vertically integrated, consolidated, has very short production cycles
Do the qualities of the poultry industry allow it adapt quicker than other meat-animal industries?
Yes
Monopoly definition
One seller of good
Monopsony definition
One buyer of good
