Monday, June 13, 2011

Week 7 - Harvest Time! Da-nah-nah-nah!

Needless to say I've been gone.......a long time! However, I'm determined to maintain a blog to some degree and I definitely want to continue documenting my experiences in poultry production. Although I have been a bit absent from the blog sphere, a lot has happened at the residence of the Electric Chicken and I'm going to pick up right where I left off - Week 7: Harvest Time! The first batch of chickens we raised were ready for harvest at approximately 7 weeks of age! Now, for a girl who has been raising beef cattle all her life this seemed EXTREMELY fast. Why might you ask? Well, it's quite simple - beef cattle take a tremendously longer period of time to reach their point of harvest compared to broilers. The typical beef animal is somewhere around18 months of age at harvest, depending upon several factors - breed, genetics, nutrition, health, and management to name a few. Eighteen months! Now compare that to my fine-feathered friends that were ready in a fraction of that time - talk about that re-occurring theme of efficiency!

This time to harvest difference is one of the concepts I discuss in detail with my students when I cover vertical integration and its application in the various food animal industries. This vast difference in time to harvest impacts our food choices and prices whether you as a consumer realize it or not.

So let's think about it all for a minute:
Vertical integration is an economic term used to describe how an industry is controlled within the marketplace. Industries that are vertically integrated are basically managed by just a few large companies. These companies own all the segments or stages of production. Despite your beliefs, this integration ultimately streamlines the production of our food, which results in more efficient production and lower costs that can be passed on to the consumer. Vertical integration can accomplish all of this because you only have one entity making all of the management decisions - simplifying production and creating uniformity in end-products.

Now, there are aspects to every industry that make it either a good candidate for vertical integration or a not-so-good candidate. Some of these aspects include capitol required, risk, geographic concentration, and time to market. The poultry and swine industries are vertically integrated industries unlike the beef industry for these reasons and more.

Poultry companies can vertically integrate because, for one, chickens are smaller animals that can be easily confined to grower houses. Just a few grower houses on one contracting farm can house thousands of broilers that will be ready to harvest at a specified time. This allows companies to geographically concentrate broiler production in just a small area - hatcheries, grower houses, and harvesting facilities can be located within miles of each other. This reduces transport costs and production losses (shrink, stress, and death loss) associated with long hauls between production stages.

Now compare that to beef cattle production: cattle are grazers by design and as such require vast amounts of land to produce hamburgers and steaks that make it to your dinner plate. In order to produce enough calves to supply just one of the major harvesting plants in our country, Ted Turner, the world's largest land owner, wouldn't even have enough land!

As a result, the beef industry is made up of hundreds of thousands of cow-calf producers spread throughout every state in the country. Although other segments of the industry may be geographically centered, like the feedlot segment, cow-calf producers (who raise the calves that are ultimately harvested) are geographically widespread. Together, they produce enough cattle to keep our stocker, feedlot, and harvesting facilities operating on an annual basis. Unfortunately, they do so in all types of environments, with all types and breeds of cattle, under all types of management. This diversity in production and lack of integrated ownership (because what company can own more land than Ted Turner???) results in vast differences in beef that you see at the grocery store and experience as a consumer.

This land conundrum isn't the only reason why vertical integration works in the poultry industry and not in the beef industry. Time to market plays a large role in this too! When we consider the biological production cycle, we find it takes significantly less time to raise a chicken than it does a cow. This has a host of implications. First, poultry are ready in far less time (6 or so weeks verses 18 or so months!). Less time to harvest generally means lower costs because you are using resources for a shorter period. Look at feed as an example: even if broilers ate the same amount of feed as steers (which they don't), you are feeding them for far less time, reducing your cost of production and thus the price you pay for meat at the grocery store - think about how much more expensive beef is than chicken!

In addition, companies can have greater turn-arounds within a production year. With a shorter time to market, Tyson can contract several batches of broilers with just one grower each year. Although Tyson doesn't contract with cow-calf producers in the beef industry, they would have to wait at least another 18 months before they could get another steer from the same cow-calf producer.

More importantly, shorter production cycles result in rapid genetic change and quicker responses to consumer demand. Poultry mature faster, allowing producers to harvest broilers at younger ages than swine and beef. This results in shorter generation intervals, making response to genetic changes in the industry faster. All of this helps a producer or company improve their product and respond to consumer demand. In the case of the broiler industry, companies like Tyson and JBS-Pilgrim's Pride can grow chickens rapidly while making genetic progress that meet consumer needs almost as fast as consumers change their minds.

The beef industry can't come close to doing that! Because of the length of production cycles and time to market in the beef industry, by the time producers figure out what consumers are demanding, make genetic decisions in response to those demands, wait 9 months for a cow to have a calf, raise that calf to harvest at 18 months of age, fabricate out the carcass and have consumers purchase the beef and eat it - guess what - they've already changed their mind and moved on to the next fad! Frustrating, huh?

For any company evaluating the risk of vertical integration, the beef industry is sure to make them run for their lives! But for companies in the poultry industry, vertical integration makes sense. This is why you see only a handful of companies in the industry, making decisions and providing you with consistent products that you demand, in a timely fashion and for a fraction of the cost of other meat, like beef.

As week 7 approached, I was finally able to grasp how time to market facilitates vertical integration in the poultry industry. With only 7 weeks into my backyard broiler experiment, the time had arrived to schedule the harvest with The Simmons. Tune in next week..........For now, I'll be channeling a little MC Hammer, "Harvest Time! Da nah nah nah, nah nah, nah nah nah nah............."

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