Feasibility research report for insuring commercial poultry production

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amount of control of their products and vast market power relative to their contract growers.Even relatively small egg and poultry producers/integrators may own and manage many aspectsof their businesses (e.g., rearing of birds, feeding, housing, husbandry, and marketing of theirproduct) and are capable of managing many elements of the process.In an effort to provide clarity, the Contractor defines below the terms producer, grower, andintegrator as they are used in this report.Poultry Producer: A person owning and growing poultry for sale into agricultural markets.Grower: A person retained under contract by the owner of poultry or an agent of that ownerto manage the growth of poultry for sale into agricultural markets.Integrator: A person who owns poultry being grown for sale into agricultural markets as wellas associated activities providing inputs, services, or processing of the poultry. The termintegrator/processor is used occasionally to focus attention on associated poultry processingactivities.The broiler sector of the poultry industry, valued at approximately $23 billion in 2008, is thelargest of the domestic poultry sectors. 6 Although the 2007 Census of Agriculture reported morethan 300 broiler operations in each of 30 states, production is highly concentrated in relativelyfew regions. 7 The top six broiler production states account for more than two thirds of theannual production (Table 1) and are located in the south. This regional concentration alsosupports strong poultry feed and poultry processing infrastructures in these southern states.Table 1. U.S. Broiler Production: 2008Number ofBirds(millions)Production(million pounds)StateGeorgia 1,409.2 7,468.8Arkansas 1,160.0 6,380.0North Carolina 796.1 5,493.1Alabama 1,062.9 5,846.0Mississippi 840.7 4,876.1Texas 640.8 3,460.3Maryland 298.6 1,612.4Delaware 242.9 1,578.9Kentucky 306.1 1,652.9South Carolina 236.9 1,516.2Virginia 250.3 1,251.5Oklahoma 237.8 1,260.3All Other States 1,526.8 8,044.0TOTAL 9,009.1 50,440.5Source: USDA, NASS. 2009, 2008 Poultry Production and Value Summary,http://usda.mannlib.cornell.edu/usda/current/PoulProdVa/PoulProdVa-05-29-2009.pdf, Accessed February, 20106 USDA, NASS. 2008, 2007 Census of Agriculture, http://www.agcensus.usda.gov/Publications/2007/Full_Report/Volume_1,_Chapter_2_US_State_Level/st99_2_013_013.pdf, Accessed February, 2010.7 USDA, NASS. 2009, 2008 Poultry Production and Value Summary,http://usda.mannlib.cornell.edu/usda/current/PoulProdVa/PoulProdVa-05-29-2009.pdf, Accessed February, 2010.Use or disclosure of information or datacontained on this sheet is subject to therestrictions on the title page of this report.5Risk Management AgencyContract No: N10PC18148
The turkey sector has an annual value of approximately $4.5 billion. Although adisproportionate share of total domestic turkey consumption occurs between November 15 andJanuary 1, the sector is far less seasonal than it has been historically. The proliferation ofprocessed turkey meat products has led to far less dependence in this industry sector onholiday/seasonal demand. Table 2 identifies the top 12 turkey production states (sorted bypounds of production) in 2008. The 9 most productive states account for more than 75 percent ofthe annual national value and span the North American continent from east to west.Table 2. U.S. Turkey Production: 2008ProductionStateNumber of Birds(millions)(millionpounds)Minnesota 48.0 1,305.6North Carolina 40.0 1,208.0Missouri 21.0 651.0Arkansas 31.0 610.7Indiana 14.5 519.1Virginia 18.0 484.2South Carolina 12.5 477.5California 16.0 435.2Iowa 9.0 360.0Pennsylvania 11.5 216.2Ohio 6.0 230.4South Dakota 4.7 189.4All Other States 40.9 1,234.8TOTAL 273.1 7,922.1Source: USDA, NASS. 2009, 2008 Poultry Production and Value Summary,http://usda.mannlib.cornell.edu/usda/current/PoulProdVa/PoulProdVa-05-29-2009.pdf, Accessed February, 2010The layer sector, the sector of the poultry industry focused on production of chicken eggs forconsumption, has an annual value of approximately $8 billion. The layer sector is more decentralizedthan the broiler and turkey sectors, with production located near both production offeed stuffs (inputs) and population centers (consumption). Table 3 identifies the top 12 eggproduction states (sorted by number of eggs produced) for 2008.Use or disclosure of information or datacontained on this sheet is subject to therestrictions on the title page of this report.6Risk Management AgencyContract No: N10PC18148
Page 1 and 2: Feasibility Research Report for Ins
Page 3 and 4: Table 17 Top Ten States Number of F
Page 5 and 6: producers fully capable of covering
Page 7: SECTION II. INTRODUCTIONThe Stateme
Page 11 and 12: integrator might be construed as an
Page 13 and 14: emanate from the fact that animals
Page 15 and 16: Meaningful analysis of contract ter
Page 17 and 18: Intense competition within the poul
Page 19 and 20: a market risk faced by an industry
Page 21 and 22: Animal Protein Free Certification P
Page 23 and 24: Emergency Assistance for Livestock,
Page 25 and 26: Environmental Protection AgencyPoul
Page 27 and 28: terms of the policies are considere
Page 29 and 30: The perils affecting production mus
Page 31 and 32: Moral hazards must be avoidable or
Page 33 and 34: III.A. The CropModern commercial br
Page 35 and 36: Table 6. Economic Indicators-Broile
Page 37 and 38: III.C. Stakeholder InputThe Contrac
Page 39 and 40: summary of the crop insurance devel
Page 41 and 42: integrators and with one exception
Page 43 and 44: In past years, concerns tied to the
Page 45 and 46: individual grower‘s performance i
Page 47 and 48: further. Similarly, risks arising f
Page 49 and 50: Many growers considered power loss
Page 51 and 52: IV.A. The CropTurkeys are large bir
Page 53 and 54: Free-range birds represent a small
Page 55 and 56: level cash receipts of almost $4.5
Page 57 and 58: include number of growers or county
Page 59 and 60:
Follow up InterviewsFollowing the l
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The attendees expressed concern rel
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Retail to consumer spreads for turk
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Poultry Improvement Plan (NPIP). Fe
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producing companies with flocks of
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Table 14. 2008 United States Egg Pr
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heavy broiler and lighter layer sto
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The integrated firms are attempting
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Although the feed cost differences
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Fayetteville, ArkansasThe session i
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and processing. The USDA ERS Poultr
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subscription. While none of these s
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WeatherHeat stress is no longer rep
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SECTION VI. FEASIBILITY ASSESSMENTP
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a fixed processing charge by sector
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Contain underwriting, rating, prici
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Appendix AGrower Contract Transpare
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terms of the poultry growing arrang
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furnished by each party, the durati
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poultry growing arrangements after
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party to the other at least 90 days
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amendment regarding the timing of t
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Another factor, however, which is i
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§ 201.100 Records to be furnished
Page 107 and 108:
Appendix BListening Session AgendaU
Page 109 and 110:
Appendix CNASS Poultry MethodologyU
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Feasibility research report for insuring commercial poultry production

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