Study highlights benefits of contract farmer, chicken company contracts

The study summarises production efficiency, returns and loan quality data
calendar icon 21 March 2022
clock icon 3 minute read

The National Chicken Council recently released a study that presents the results of a recent broiler industry survey designed to capture key live chicken production statistics. In addition, the study summarises several key trends in broiler production efficiency, returns and loan quality data.

“Raising chickens under contract is one of the best and most reliable sources of cash flow that helps keep families on the farm,” noted agriculture economist and the study’s author Thomas Elam, president of FarmEcon LLC. “The business partnerships between chicken farmers and chicken companies are mutually beneficial, viable and profitable. The real winner is the American consumer, though, who benefits from the healthiest and most affordable protein in the meat case.”

The study represents the most recent publicly available government data and a new survey from companies responsible for 83% of total chicken production in the United States.

According to the most recent USDA data available, the $68,455 median income for chicken farmers was significantly higher than both all farm households and all US households. Sixty percent of chicken farmers earned household incomes that exceeded the US-wide median.

The top 20% of contract chicken farmers earn on average $142,000, significantly higher than the top 20% of all farm households ($118,000) and all US households ($101,000), according to the same data.

In terms of broiler farm loan performance, data show significantly lower charge off and deficiency percentages for chicken farmers compared to all agricultural loans.

Responding companies reported significant waiting lists for those who would like to enter live chicken production or expand existing operations. There were 1,672 applications from potential producers and 335 expansion requests from existing farmers. These applications indicate a steady interest in entering contract chicken production.

In 2021, only 6% of respondent’s farmers left their company, including retirements. Of those, only 0.7% of farmers left due to contract termination.

The health and well-being of the chickens has greatly benefited from the contract farming structure. In 2021, the average on-farm liveability of a flock of US broiler chickens was almost 95%. In 1925, it was only 82%. Farmers who furnish live chicken housing have captured this benefit of better chicken performance.

The performance-based contract structure of modern poultry production was instinctively designed to put the well-being of the birds as the top priority, as incentives are given to farmers who raise the healthiest birds, take risks and work hard. It incentivizes farmers to do their best, to compete, just like every other business in America or any other free market.

“On any given day, swings in the cost of feed inputs for livestock, things like soybeans and corn, could financially challenge a farmer,” said Gary Anderson, a retired US Army helicopter pilot and chicken farmer in Alabama, in a recent column. “Changes in the end prices of chicken could, too. As a chicken farmer, I don’t worry about that. Processors take these market risks for me – providing the feed and a baseline price for chicken – letting me focus on raising the flocks in the best way possible.”

“What this data further show, is that the chicken industry should be looked at as a model, and not a target of unwanted and unnecessary regulations that are being discussed in the Biden administration,” added NCC President Mike Brown. “The latest Consumer Price Index released last week marked the biggest inflationary gain since 1981. At a time when input costs are through the roof, is now really the time to be discussing regulatory burdens that would increase costs for producers and add more costs to already soaring grocery bills for Americans?”

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