square mile per year, transfer costs per bird increase continuously from 

 3.325 cents for system A with an output of 1.19 million birds annually 

 to 4.639 cents for system F with an output of 9.88 million birds. However, 

 at the 5,000 and 25,000 pound density levels, transfer costs initially de- 

 crease slightly l)efore commencing to increase. Transfer costs decrease 

 slightly from the 1.19 million bird output to the 3.56 million liird out- 

 put. The decrease is the result of chick distribution costs decreasing 

 more than the increase in broiler assembly costs. 



The combined in-plant and transfer costs represent the full cost of a 

 specific type of broiler marketing system for variovis system sizes. At the 

 low production density level of 1,000 pounds per square mile per year, 

 increasing transfer costs eventually overcome the diminishing processing 

 and hatching economies causing the full cost per bird to increase. The 

 cost per bird decreases from 18.816 cents for an annual output of 1.19 

 million birds to 15.726 cents for an output of 7.11 million birds. The 

 cost is higher for larger size systems. 



With production density increased to the 5,000 pound level, the 

 cost per bird decreases continuously throughout the range of system 

 sizes considered. The cost per bird decreases from 17.925 cents for an 

 output of 1.19 million birds to 13.635 cents for an output of 19.76 million 

 birds. However, most of the economies are realized at an output level 

 of 7.11 million birds per year. 



At the 25,000 pound production density level, combined costs per 

 bird also decrease continuously over the range of system sizes consider- 

 ed. The cost per bird decreases from 17.491 cents for an annual output 

 of 1.19 million birds to 12.663 cents for an output of 19.76 million birds. 

 Most of the economies are realized at an output level of 9.88 million 

 birds. 



The results of this analysis indicate that economies of scale exist for 

 the range of combined processing and hatching operations considered. 

 However, consideration must be given to the production density of broil- 

 ers to determine the size of the least cost system. An increase in produc- 

 tion density tends to shift the least cost operation to a larger size system. 



Systems may increase production density in several ways and possi- 

 bly reduce transfer costs. The system can offer higher payments to at- 

 tract additional producers located closer to the center of production and 

 drop its producers out on the fringe of the producing area. The system 

 might also elect to construct and operate its own broiler producing 

 facilities close to the processing and hatching facilities. 



47 



