Marketing New England Poultry 



7. Economics of Broiler Feed Mixing 

 and Distribution 



By Clark R. Burbee, Edwin T. Bardwell ami Alfretl A. Brown ^ 



I. Introduction 



Substantial changes have taken place in the technology available to 

 feed manufacturing firms and in the structure of firms in the broiler in- 

 dustry during the last fifteen years. The advancement in technology and 

 competitive pressure has caused a shift in the location of feed manufac- 

 turing facilities from distant large-scale mills with their extensive dis- 

 tribution organizations to local specialized mills distributing directly 

 to broiler production units. 



Relocating feed manufacturing facilities into major broiler produc- 

 ing areas offers potential cost reductions from (1) operating a modern 

 specialized mill, (2j direct distribution of feed to the producing units 

 by truck, and (3) lower rail freight rates in some areas on ingredients 

 not transhipped by rail as finished feed.^ 



A primary question facing firms in the industry is the optimum sized 

 manufacturing facility and distribution operation needed to minimize 

 the total feed cost per ton at the farm. However, the optimum size is de- 

 pendent on economies of size in manufacturing and the spatial costs of 

 distributing feed. If economies of size exist (decreasing unit cost with 

 increasing size of mills) increasing capacity may require a firm to en- 

 large its distribution area. Enlargement of the distribution area increases 

 the average length of haul per ton and consequently the unit distribution 

 cost, providing production density remains constant. The increase in 

 unit distribution cost may partially or totally offset the reductions in 

 unit cost resulting from economiesof size in manufacturing. Management 

 must consider manufacturing and distribution costs simultaneously to 

 determine the least cost size operation. 



1 Mr. Burbee is Agricultural Economist, Marketing Economics Division, Economic 

 Research service, U.S.D.A., formerly stationed at the University of New Hampshire, 

 now stationed at theUniversity of Minnesota. 



Mr. Bardwell is Cooperative Agent, Agricultural Experiment Station, University of 

 New Hampshire and Economic Research Service, U.S.D.A. 



Mr. Brown is Professor of Marketing and Transportation, Department of Agricul- 

 tural and Food Economics, University of Massachusetts. 



2 The introduction on July 15, 1964 of mileage, non-transit rates on shelled corn 

 between points in the East is an additional change of potential significance. They are 

 temporary rates due to expire midnight July 14, 1966. Should the rates become a 

 permanent part of the structure, they will add to the cost advantages of mills located 

 in feed-consuming areas that can utilize direct mill-to-farm distribution by truck. 



