percent for the three largest hatcheries considered, F, G, and H. Exam- 

 ination of the relationships indicates that reductions in distribution costs 

 are relatively minor for increases in density above the 3,000 chick per 

 square mile per year level. 



V. Combined Costs for a Poultry Marketing System 



Costs and economies of scale for broiler chick hatching and chick 

 distribution are synthesized in this study. Costs for broiler assembly and 

 eviserated processing were synthesised in two previous studies in this 

 series. Combining the results of the three studies provides the long-run 

 relationships between costs and size for a poultry marketing system con- 

 sisting of these four functions. It is irrelevant whether each function is 

 individually owned or the four functions comprise a wholly owned in- 

 tegrated organization since the entrepreneurial demands are not in- 

 cluded as costs. The important feature is that the capacities of the hatch- 

 ing, chick distribution, and broiler assembly functions are equivalent 

 to the capacity requirements of the processing plants they serve. This 

 eliminates any one function from being a "bottleneck" in the system 

 or any function having unnecessary excess capacity. 



Table 22 summarizes the costs for each of the four functions con- 

 ducted by six model systems operating at 100 percent of capacity. Econ- 

 omies exist throughout the range of processing plants and hatcheries 

 considered. The processing cost per bird decreases from 13.311 cents for 

 system A processing 1.19 million birds annually to 9.247 cents for system 

 H processing 19.76 million birds annually, a reduction of 4.064 cents 

 per bird. The hatcheries which operate at 95 percent of capacity have a 

 cost per processed bird ranging from 2.180 cents for system A to 1.037 

 cents for system H. This is a reduction of 1.043 cents per bird. Note that 

 the processing costs per bird are six to nine times greater than the 

 hatching costs and dominate the in-plant costs for this type of integrated 

 system. 



Considerable difference exists between broiler assembly and chick 

 distribution costs. Assembly costs are 13 to 27 times greater than chick 

 distribution costs. Furthermore, the relationships between assembly and 

 distribution costs and size of operation are different at any given density 

 level. Assembly costs increase continuously with increasing volume if all 

 other factors are held constant, but distribution costs initially decrease 

 and eventually increase. 



Figure 7 illustrates the combined in-plant scale curves, transfer cost 

 curves for three production density levels, and the total comljined cost 

 curves for the four functions at three density levels. The combined scale 

 curve for processing and hatching is similar in shape to the processing 

 scale curve but is somewhat steeper in slope. Economies exist through- 

 out the entire range of system sizes considered but are small for annual 

 outputs in excess of 9.0 million birds. 



The combined transfer cost functions used in this study reveal the 

 tendency for this cost to increase widi increasing volume at a given den- 

 sity level. At the low density level, 1,000 pounds of live broilers per 



44 



