Marketing New England Poultry 



3. Capital Accumulation Potential 

 of Broiler Growers 



By Clark R. Burbee and George E. Frick 1 

 Introduction 



A very high proportion of commercial broilers and other meat birds 

 are now produced under arrangements or contracts between the pro- 

 ducers and other firms. Such arrangements involve cost sharing in the 

 production of the birds and definite agreement as to production methods, 

 market weight, and market outlet. Because this system of sharing financ- 

 ing and decision making generally includes some firm already providing 

 a marketing or input service, such as broiler processing or feed manu- 

 facturing, it has been labeled "vertical integration". This term applies 

 because the processor, for instance, through contracts with producers, 

 shares control of firms in a second level of the production-marketing 

 spectrum. 



There are many reasons why vertical integration has developed so 

 strongly in the broiler industry. The independent growers have been 

 willing to transfer the risks inherent in the broiler market to the larger 

 integrating firms in exchange for relatively steady incomes. The large 

 processors require a high and steady volume of poultry to achieve low 

 unit cost operations in their plants. The large feed millers seek to achieve 

 low average cost production through assured high output of feed to 

 their integrated producers. It is probably also true that large integrators 

 obtain lower input prices through mass purchasing, and through stand- 

 ardized production management they can achieve a consistent quality 

 broiler and a competitive advantage in the dressed broiler market. 



All of the above reasons for the development of vertical integration 

 would apply anywhere, but the development of specialized broiler pro- 

 ducing areas in the Southeast, the Delmarva Peninsula, and Maine is 

 the result of the availability of the necessary inputs and the potential 

 higher returns to these inputs if they were put into broiler production. 

 In New England, broiler production has increased particularly in Maine. 



1 Clark R. Burbee is an Agricultural Economist, Marketing Economics Division, 

 Economic Research Service, U. S. Department of Agriculture, and George E. Frick is 

 an Agricultural Economist, Farm Production Economics Division, Economic Research 

 Service, U. .S. Department of Agriculture. 



