Fixed Inputs 



The contract grower supplied all fixed inputs for the production of 

 broilers including buildings, equipment, and his labor. The building was 

 generally a frame structure of wood suitable for broiler or egg produc- 

 tion. Equipment included feeders, waterers, bulk feed facilities, and 

 brooders or some other type of heating system. If the grower provided 

 water from the farm, a well and pumping equipment was required. 



Integrators have shown very little interest in acquiring ownership of 

 broiler production facilities. In northern New England, however, some 

 of the processor-integrators own a few broiler houses and equipment. 



LEVEL OF TECHNOLOGY OF CONTRACT GROWER PRODUCTION UNITS 



Vertical integration has created certain problems concerning the 

 adoption of new technology. Basically, the problem is that the produc- 

 tion of broilers is a joint undertaking between a few integrators and 

 many growers. Prior to integration, production decisions were made by 

 the producer. The independent grower was free to decide at which level 

 of technology to operate and when to adopt new techniques. But broiler 

 production now involves two parties who do not always have the same 

 interests. 



The conflict of interests became especially acute with the depressed 

 condition of the industry during 1958 and 1959. Expansion in northern 

 New England all but ceased, and integrators became very much inter- 

 ested in reducing costs. The integrator is especially interested in any de- 

 velopment that may increase feed efficiency and rate of growth or reduce 

 mortality and the costs of fuel, litter removal, electricity and any other 

 purchased items. 



One result of that interest was the decision by some integrators that 

 growers should install central heating systems, house-wall insulation and 

 ventilation systems. Achievement of this level of technology by growers 

 would reduce fuel costs and probably would to some extent improve 

 feed conversion and reduce mortality, thus reducing the integrators' 

 costs. The growers would not use as much labor with central heating, 

 but their capital requirements and fixed costs would increase consider- 

 ably with no increase in their output. In any case, many of the contract 

 growers insulated houses, and some installed central heat and ventilation 

 systems. Those growers who did not comply were less likely to get con- 

 tracts during the winter months.-. 



LOCATION OF SUPPLY AREAS FOR BROILER PRODUCTION 



The location of the processing plants for broilers and the policies of 

 the integrators can give some indication of the degree of decision-making 

 power held by them. A processor with an exclusive supply area is in a 

 position to utilize the broiler growers whether he is or is not vertically 

 integrated with them. A processor or integrator that has to share his 

 supply area with another processor or integrator is not in this position. 

 In either case, if good alternatives exist for the resources of the growers, 

 integrators will not be able to exercise as much decision-making power 

 over their operations, and may have to make higher returns to them 

 than would lie true where such alternatives do not exist. 



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