US broiler industry thrives with progressive competition

Poultry companies, chicken farmers and consumers in the US progress with a flourishing competition, according to an industry study.

"On the national scale, it is the overall conclusion of this study that the chicken industry is a competitive and thriving sector. Intense competition among chicken companies leads to product innovation and lower prices for consumers. The vertically integrated structure of the industry has given it an advantage compared to its competitors and allowed it to respond quickly to changing consumer demand," wrote Dr Thomas Elam, an agricultural economist and president of FarmEcon LLC."

''The vertically integrated system, in which a single company owns or controls virtually all phases of the operation, also benefits the independent family farmers who raise chickens under contracts with the companies,'' Elam stated.

According to the study, contract growers are insulated from integrator margin risk by fixed price contract terms. They receive payments that are not tied to market variations in prices of chicken and feed. These risks are largely shifted to the integrator, who absorbs the financial losses from adverse weather, general disease outbreaks, feed quality, and other factors potentially adversely affecting live chicken performance.

Production and consumption of chicken has grown almost every year since the 1960s, as consumer tastes changed, new markets emerged, and new products were developed, and chicken companies have achieved a strong competitive position with respect to other meats.

The broiler industry is more concentrated today than it has been in the past with the top four companies having 53% of production in 2009 compared to 40% in 1992. He noted, however, that the chicken industry is less concentrated than meatpacking at 79% or pork processing at 65%.