Marketing New England Poultry 



8. Effects of Firm Size and Production 

 Density on Spatial Costs for an Integrated 

 Broiler Marketing Firm 



By Clark R. Burbee, Edwin T. Bardwell, and William F. Henry i 



I. Introduction 



During the past decade, firms in the highly competitive broiler 

 industry have made adjustments to maintain or improve their competi- 

 tive positions. One course of action has been to integrate or coordinate 

 the various dissimilar but continuous stages of broiler production and 

 marketing. The typical firm operates plants for processing broilers, 

 hatching chicks and manufacturing formula feed. Since the practice is 

 still to contract broiler production on farms in the area surrounding 

 the firm's plants, the firm has to perform the spatial activities of dis- 

 tributing feed and chicks to the farms and assembling finished broilers 

 at the processing plant. 



The density or concentration of broiler production attained by a 

 firm can have a major effect on its competitive position. A firm that 

 increases broiler production density reduces the average length of haul 

 for chicks, feed, and live broilers which theoretically results in a lower 

 unit cost. On the other hand, a firm that increases its plant in size and 

 output in order to lower unit costs and increases broiler production by 

 enlarging the production area at the same density level may increase 

 total unit cost. The increase in costs due to spatial factors may be great- 

 er than the additional economies gained from increases in plant size. 

 Consequently, a firm considering expansion of plant size and output 

 must also consider the effect on spatial costs before a decision can be 

 made. 



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 the University of Minnesota. Mr. Bardwell is Cooperative Agent, 

 New Hampshire Agricultural Experiment Station and Economic Research Service, 

 U.S.D.A. Mr. Henry is Agricultural Economist, Agricultual Experiment Station, Uni- 

 versity of New Hampshire. 



