Broiler, Fryer, and Roaster Chickens

SIC 0251

Companies in this industry

Industry report:

This category includes establishments primarily engaged in the production of chickens for slaughter, including those grown under contract.

Industry Snapshot

The United States is the world's largest producer and the second largest exporter of poultry meat. The United States exports about 18 percent of its domestic production of poultry meat. Although the number of poultry farms decreased by half over the latter half of the twentieth century, output rose dramatically, from about 1.5 billion birds in 1959 to over 8.5 billion broilers in 2009. The total live weight of broilers in 2009 was 47.7 billion pounds, down 5 percent from the previous year. Total value of production from broilers in 2009 was $21.8 billion, down 6 percent from 2008.

The industry survived the late-twentieth-century recession reasonably unscathed. In the early 1990s, it benefited from unprecedented consumer demand for poultry. In 1992 sales of chicken outstripped those of red meat for the first time. By the late years of the first decade of the 2000s, chicken accounted for nearly a 40 percent share of the meat market, compared to beef at 30 percent and pork at 24 percent.

Chicken was also being marketed more widely, particularly in fast-food restaurants. Between 1970 and 1990, about 25,000 outlets introduced chicken in the form of sandwiches or nuggets, and these numbers continued to grow into the twenty-first century. There was also steady growth in the number of specialist fast-food chicken chains, such as KFC and Church's Fried Chicken. Chick-fil-A also launched a widely successful media campaign to draw attention to their chicken sandwiches. The broiler, fryer, and roaster industry and the fast-food industry have worked closely together to develop products especially for these markets. Chicken was also being widely promoted as a less expensive and healthier meat option, and, given the increasing food prices of the late years of the first decade of the 2000s and early 2010s, consumers continued to supply their diets with significant portions of chicken.

Organization and Structure

In the early years of the first decade of the twenty-first century, seven to ten companies controlled about 50 to 60 percent of the chicken market. These were vertically integrated concerns--companies with control over every stage of poultry growth and production, from egg production to broiler slaughter.

By the start of the twenty-first century, independent farmers under contract to large poultry companies grew 89 percent of the chickens, a 10 percent decrease from the mid-1990s. The remainder was farmed directly by the companies themselves. Under the contract system, the company provided the chicks, feed, medication, and transportation to market. The farmer furnished the housing, equipment, labor, and miscellaneous supplies, and agreed to raise the birds until slaughter. Farmers were generally paid according to how much feed was needed for the birds to achieve market weight. The less they needed, the cheaper the chickens were to produce, and the more farmers earned.

Background and Development

Broiler production increased from 34 million in 1934 to approximately 6 billion in 1990. Output increased almost continuously in the latter half of the twentieth century. Better breeding, feeding, and disease control, combined with more sophisticated housing, reduced broiler production time by two weeks between 1980 and 1990. In 1935, it took a farmer 16 weeks to produce a 2.9-pound broiler, with 4.5 pounds of feed needed per live weight. By 1988, a farmer could produce a four-pounder in just six weeks, on less than two pounds of feed per live weight. This increase was realized by the use of intensive farming methods; new systems of temperature, feed, and water control; careful breeding; and the use of antibiotics to speed the birds' growth.

Increased national and international demand for chicken and chicken products fueled steady industry growth, about 5 percent per year since the early 1960s. In 1995, chicken producers raised about 7.33 billion birds with sales of more than $11.4 billion. Total broiler production continued to increase, surpassing 1995's approximately 34-billion-pound level of production. About 50 percent of chickens were sold directly to consumers, another 40 percent were sold to restaurants, and 10 percent went for export or pet food.

Despite a sustained drop in the price of chickens in 1994 and 1995, in 1996 wholesale prices for broilers climbed to about 60 cents per pound, while broiler parts held at roughly $1.92 per pound for boneless breasts and about 96 cents for breasts with ribs on. Retail prices ranged from 98 cents per pound for fresh whole broilers to about $2.05 for bone-in breasts.

In 1996, per capita consumption of chicken stood at 72.9 pounds. The type of chicken consumed changed in the latter part of the twentieth century. Chicken was marketed as "whole," "cut-up and parts," or "further processed." Sales in the latter two categories rose steadily, partly due to the fact that consumers considered them time-saving. The market share of cut-up and parts grew from 15 percent in 1962 to 56 percent in 1990. Sales of further processed chicken also increased, from 2 percent market share in 1962 to 26 percent in 1990, of which boneless chicken comprised 80 percent. Also included in this category were value-added products such as nuggets, which became very popular in the 1990s, chicken strips, patties, and versions of buffalo wings.

However, sales of whole chickens plummeted to about 20 percent of all chicken sales in 1994. This trend continued throughout the 1990s. On the other hand, the popularity of rotisserie chicken, as marketed by restaurants such as Boston Market, somewhat stabilized whole chicken sales.

In 1996, the U.S. Department of Agriculture (USDA) revamped its meat inspection system to ensure a high standard of safety. Under the new system, scientific tests and modern technology supplanted the former system, which relied on the inspectors' abilities to perceive contamination themselves. The new method, the Hazard Analysis and Critical Control Points (HACCP), required poultry companies and the USDA to participate in an effort to reduce and prevent contamination.

In the early twenty-first century, there were 175 poultry-processing plants in the United States. The industry employed approximately 240,000 workers. Broiler production was 49.2 billion pounds in 2007. The value of broiler production that year was $21.5 billion, an increase of 21 percent from 2006. Broilers represented 67.4 percent of the combined value of poultry products, including broilers, eggs, and turkeys, which totaled $31.9 billion in 2007, compared to $25.8 billion in 2006. Boneless chicken breasts continued to be the most popular cut among consumers.

Controlling the spread of disease and ensuring worker safety will most likely continue to be two of the major challenges facing the poultry industry throughout the twenty-first century. In 2002, for example, Pilgrim's Pride instituted the largest meat recall in U.S. corporate history when it removed 27 million pounds of poultry from shelves due to suspected contamination with listeria.

Another example has to do with the impact of chicken processing on the environment. Chicken feed contains large amounts of the strengthening nutrient phosphorus, which is difficult for chickens to digest. Therefore, the chickens' waste material, much of which is used as manure, also contains high levels of phosphorus. If manure runs off into ponds and streams, human water supplies can be endangered. Industry researchers and scientists from the University of Delaware have worked to develop a corn hybrid with a more easily digestible phosphorus. However, processors still face public perception of the negative effects of genetically altered foodstuffs, and it may be some years before such products see widespread use.

In the early years of the first decade of the 2000s, consumer concern regarding antibiotic use at poultry plants began to rival concerns regarding disease. As a result, industry leaders Tyson Foods, Perdue Farms, and Foster Farms began to remove antibiotics from feed for healthy chickens.

Worker safety also was a concern, since increased product demand and faster machinery had significantly increased the USDA-mandated maximum production line speed from 70 birds per minute in 1979 to up to 180 birds per minute by the early years of the first decade of the 2000s. The rate of worker injuries had also increased so that cumulative trauma disorders among poultry workers, such as carpal tunnel syndrome and tendonitis, were 16 times the national average. The National Institute for Occupational Safety and Health determined that 49 percent of the workers in one plant's deboning line sustained injuries to their upper bodies. Additionally, the U.S. Department of Labor estimates that one in every six workers will suffer some sort of on-the-job injury, compared to a rate of one in twelve for the manufacturing industry in general.

Current Conditions

In 2010, per capita consumption of chicken in the United States was estimated at more than 80 pounds, compared to approximately 60 pounds of beef and 47 pounds of pork. Broilers averaged $0.776 per pound in 2009, down from an annual average of $0.794 in 2008. According to the USDA's World Agricultural Outlook Board, per capita consumption of poultry was expected to increase gradually through the 2010s, from approximately 83 pounds (broilers and other chicken) in 2010 to over 90 pounds by 2019.

The poultry industry in the late years of the first decade of the 2000s and into 2010 was profitable for most suppliers but volatile due to high feed prices and sluggish consumer demand, which caused the industry to shrink its production to keep costs low and prices high enough to meet profit margins. Poultry producers are highly dependent on feed prices, which can strongly affect profit margins. Corn and soybean meal account for about 45 percent of the production costs associated with growing a live chicken. Thus, the continued high cost of feedstocks, combined with a global recession that reduced consumer demand for meat, led the U.S. poultry industry to slow production at the beginning of the 2010s.

Industry Leaders

The poultry industry was dominated by Tyson Foods, Inc., until December 2006, when Pilgrim's Pride Corp. purchased Gold Kist for $1.2 billion. Since then, the two companies together have ruled the poultry industry in the United States, although a few other players, such as Perdue Farms, continue to carve out a corner of the market.

Pilgrim's Pride, which first became an industry leader in 2003 when it purchase the chicken-processing assets of ConAgra Inc., earned $7.1 billion in fiscal 2009 and employed 41,000 people. Based in Pittsburg, Texas, Pilgrim's Pride markets its products in Asia and Europe as well as in the United States. In 2010 the company owned and operated 29 chicken processing plants (three in Mexico, one in Puerto Rico, and the remainder in the United States) and nine prepared-foods plants. Seven additional processing plants and two prepared-foods plants were idle in 2010. Thirty-five feed mills and 41 hatcheries supported these plants, and approximately 4,400 growers supplied poultry for the company's operations.

Tyson Foods, Inc., based in Springdale, Arkansas, was the world's largest producer, processor, and marketer of meat foodstuffs, including chicken. The bulk of its business was concerned with value-enhanced poultry products, such as chicken patties, precooked and prepackaged chicken, and Rock Cornish hens. Tyson controlled all aspects of its poultry production, from genetic research and breeding to hatching, rearing, and feed milling. It was also concerned with veterinary and technical services, transportation, and delivery. With 117,000 employees, Tyson posted sales of $26.7 billion in 2009.

John Tyson, the grandfather of the current chairman, entered the poultry business in the 1930s, although it was not until 1947 that the company was incorporated under the Tyson name. After starting out as a dealer in chicken, John Tyson began raising them. During the 1950s the company significantly expanded, and in 1958 it opened its first processing plant in Springdale, Arkansas. In 1960, Don Tyson became manager. Three years later, he renamed the company Tyson's Foods, Inc., and introduced Tyson Country Fresh Chicken, packaged birds that have become the company's mainstay. In 1971 the name was changed yet again to Tyson Foods, Inc.

Although the company has grown steadily over the years, a veritable explosion in its trade occurred in the 1980s as health-conscious consumers switched from red meat to chicken. By 1985, it had achieved $1 billion in annual sales. Between 1984 and 1989, Tyson's profits more than quadrupled, while its revenues tripled. Tyson Foods had consolidated its dominance of the market by purchasing key poultry operations, including Prospect Farms, Consolidated Food's (now Sara Lee) Ocoma Foods Division, Heritage Valley, Lane Processing, and the Tasty Bird division of Valmac. In 1989, it beat out rival ConAgra, Inc., for control of Holly Farms, the nation's leading brand-name broiler producer. Tyson was also involved in the Mexican food business, produced by-products for pet food, and acquired a stake in a fishery.

Headquartered in Springdale, Arkansas, the chicken capital of the nation, Tyson Foods leased or owned 63 processing plants, 69 broiler hatcheries, 1,230 breeder houses, and 1,676 broiler farm houses. In addition to selling to the U.S. market, Tyson exported to Canada, Mexico, Central America, the Caribbean, the Commonwealth of Independent States, the Middle East, the Far East, Sweden, and the United Kingdom. Japan had also become an important customer of Tyson chicken: Tyson supplied Japan with more than 50 percent of all its U.S. chicken imports.

ConAgra, which sold its chicken-processing assets to Pilgrim's Pride in 2003, had been involved in the broiler industry since 1982 when it bought Country Pride, a leading producer of broilers. It continued to market chickens under this label and also under its Country Skillet and Frozen Banquet brands. ConAgra came into existence in 1919 as the Nebraska Consolidated Mills Company. Its founder, Alva Kinney, concentrated on the grain-milling business, and it was not until the late 1940s that the company entered the prepared foods industry. The company continued to diversify through the 1960s, when it first gained an interest in the chicken market, developing poultry growing and processing sites in Georgia, Louisiana, and Alabama. In 1965, it expanded into the European market, eventually forming a partnership with BioterBiona, SA, a Spanish breeder of chickens, other livestock, and animal feed. In 1971, the company changed its name to ConAgra, meaning "in partnership with the land." It was first listed on the New York Stock Exchange in 1973.

During the early 1970s, the company languished as many of its acquisitions failed to thrive. In 1975, former Pillsbury executive Charles Harper was brought in as president to turn ConAgra around. He purchased Banquet Foods Corporation in 1980 as a way to increase ConAgra's share of the chicken market. In 1982, ConAgra moved into first place in the chicken industry when it formed Country Poultry, Inc. By the following year, the division was the nation's biggest poultry producer, with more than one billion pounds of brand-name broilers. In 1987, it tightened its grip on the broiler industry when it bought Longmont Foods, another poultry producer. It was eventually pushed into the number-two spot by Tyson Foods. Competition between the two companies intensified in 1999 when Tyson filed suit against ConAgra, charging ConAgra with luring away four top-ranking Tyson employees and stealing company secrets. Tyson eventually won the legal skirmish.

Atlanta-based Gold Kist Poultry Group, a farmers' cooperative formed in 1933, reported sales of $1.85 billion in 2003 and employed 17,000 people, and in 2006 it was purchased by Pilgrim's Pride for $1.2 billion. Perdue Farms, a privately-run company headed by James Perdue and based in Salisbury, Maryland, reported sales of approximately $3.35 billion in 2006 and employed 22,000 people. Leading chicken-producing states included Arkansas, Georgia, Alabama, North Carolina, and Mississippi.

Workforce

U.S. chicken processors employ a total of about 14,600 workers. Approximately 90 percent of chicken farms employed fewer than five workers in the early 2010s. However, the 2 percent of the industry that employs 100 or more generates 90 percent of the industry's revenues. Alabama, Texas, Georgia, and North Carolina have the most poultry workers.

Although most poultry farmers worked as independent contractors for the large poultry companies, their relationship was usually one of dependence. Fewer poultry producers meant that farmers often had no choice but to take what business they could get. Although they may have depended on a company for their livelihood, they did not enjoy the benefits of employment, such as workers' compensation, health insurance, or paid vacation time. To be eligible for a contract, growers had to invest heavily in plants and equipment, thus tying themselves up with debt for long periods of time. Their contracts with poultry companies did not last the length of their mortgages, but were automatically renewable unless either party wished to cancel. In practice, this meant that farmers were guaranteed payment for no more than the next flock of chickens.

Although there was some talk of setting up a growers' organization to lobby for legislative change in the industry, growers were fearful of being boycotted or blacklisted by the producers if they tried to organize. The poultry industry's political clout was legendary. Its political action committee contributed hundreds of thousands of dollars to politicians, particularly those from the South. John Tyson, head of the largest poultry company, was a personal friend of President Bill Clinton and contributed generously to his election campaign. The poultry companies defended the contract system by pointing out that they provided employment and that they offered farmers a steady income.

Some steps to protect the growers have been taken, although growers said they did not go far enough. They wanted to see laws that would require poultry companies to pay them within a specified time; provide for mediation in the case of disputes; allow growers to recoup their investment if a contractor backed out of a deal; adjust prices for growers whose income was affected by weight; and prevent unfair trade practices.

America and the World

Most of the market leaders had a stake in the poultry market abroad. For example, Tyson Foods, Inc. had important markets in Western Europe, the Caribbean, Mexico, and the Pacific Rim. The latter alone accounted for almost 50 percent of all exports in this category. Demand for U.S. chicken also increased in Russia and former Soviet Union countries. However, high feed prices and a global recession led to a decline in demand for meat products overseas. As a result, broiler exports in 2009 totaled 6.8 billion pounds, down from 7.0 billion pounds in 2008. Exports in 2010 were expected to be even lower at 5.8 billion pounds, according to projections by the USDA. Russia and China, including Hong Kong, accounted for nearly 60 percent of all U.S. exports. South Africa, Mexico, Canada, and Japan were also significant importers of U.S. poultry.

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