payment, production methods to be used, and an arbitration procedure. 

 The contract should also contain any other features required to make it 

 a legal document. 



u 't?* 



Types of Contracts Used or in Use 



A variety of contracts have been used or are in use in northern New 

 England between integrators and growers. This section will cover the 

 "flat fee", "efficiency", "price-efficiency", and "price" contracts. 



Flat Fee. The flat fee plan provided for a payment per bird or per 

 square foot of space for each week of the period required to raise the 

 flock. This plan was used extensively prior to 1957. Generally the pay- 

 ment was 1 cent per broiler, or per square foot of house floor space used, 

 per week. However, this contract plan did not provide incentive for a 

 grower to improve his management. A grower who produced at a lower 

 unit variable cost than another grower received the same unit return. 

 Furthermore, the plan did not provide for sharing of price risk, as the 

 integrator absorbed all price fluctuations. 



Efficiency. This plan provided for a method of determining returns 

 on the basis of some measurement of efficiency. A physical measure, such 

 as feed conversion, was used with a schedule of payments. This plan pro- 

 vided incentive to the grower but failed to provide for a sharing of price 

 risk. Historically, integrators lost money as a result of price declines us- 

 ing this contract. 



Price-Efficiency. This plan provided a method of determining returns 

 based on the prevailing live-weight market price, cash cost of produc- 

 tion, and some unit of physical efficiency. This plan provided incentive 

 to the grower and a method of sharing price risk. The plan generally 

 contained a minimum guarantee to growers usually 0.5 cent per bird or 

 per square foot of house floor space per week. 



Feed conversion was the most widely adopted efficiency unit of meas- 

 urement for this plan. Integrators prepared schedules with different 

 levels of feed conversion and broiler market prices. The grower was paid 

 a minimum return on a weekly basis. The incentive payment, if any, was 

 based on feed efficiency. 



However, feed efficiency is not an equitable measurement. It was pre- 

 viously noted that feed conversion had a seasonal cycle which tended to 

 move with but was not related to seasonal fluctuations in the live-weight 

 price. This tended to induce wide variations in returns to growers, the 

 highest returns coming from flocks sold during the late spring and sum- 

 mer and the lowest returns coming from flocks sold in the late fall and 

 winter. The minimum guarantee reduced some of this variation by estab- 

 lishing a floor for returns. 



Another price-efficiency plan was the cost-of-production method of de- 

 termining returns. The incentive payment was determined by deducting 

 the integrator's cost of producing the flock from the value of the flock. 

 The grower and integrator shared any profits on a predetermined basis. 

 If the flock was raised at a loss to the integrator, the grower received 

 only the minimum guarantee. Under these plans, unit returns to the 

 grower ranged from the minimum guarantee to as high as 1 to 1.25 cent 

 per bird or per square foot of house space per week. 



Price. This plan provided a method of payment determined strictly 

 by the prevailing market price for live broilers. The plan generally con- 



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