To understand how Mississippi’s poultry industry has advanced to become the state’s top agricultural money maker, think of the hub system the airlines use, says Mark Leggett, Mississippi Poultry Association president.
Developed during the 1960s and ’70s, the hub system, or what the industry calls vertical integration, ended segmentation of the industry and ensured a way to meet consumer demand that long ago outpaced that of beef and pork nationally and is projected to surpass pork worldwide in the next five years.
There “could be no marketing until vertical integration took place,” Sanderson Farms CEO Joe Sanderson Jr. explained in a 2012 video produced for the 75th anniversary of the Mississippi association.
Vertical integration brought Mississippi’s poultry industry much closer to full production capacity and created economies of scale that keep product costs down, Sanderson noted.
The hub system that evolved in Mississippi starts with the state’s half dozen broiler companies serving as hubs, or integrators, Leggett said. “Airlines have hubs. Smaller planes come in and larger planes go out. In the chicken business you have a complex” operated by an integrator that includes a feed mill, hatchery and processing plant.
In addition to Sanderson Farms, Mississippi integrators are Koch Foods, Marshall Durbin Co., Peco Foods, Tyson Foods and Wayne Farms.
Laurel’s Sanderson Farms and other integrators work with 100 or so poultry farmers within an approximately 60-mile radius of each of their complexes.
The poultry farmers specialize in one of three areas: growing broilers, breeding for broilers, or raising pullets.
The broiler farmer gets small chickens from the integrator and raises them to required weight. In addition to the chicks, the integrator provides the feed and medication. It pays the farmer based on the weight the chicken reaches. Broilers typically weigh from 3.8 pounds to 8.5 pounds when slaughtered, depending on the target market.
With hens and roosters provided by integrators, the breeding houses ensure production of the fertilized eggs that go to the integrator’s hatchery.
The pullet houses raise the adolescent chicken to breeding age and transfer them to breeding houses.
“It’s a tightly controlled and complex logistics system,” Leggett noted. “It’s more efficient for that one company to control everything from the hatchery to the grocery store.”
Two developments over the past 25 years have contributed significantly to the vertical integration of the industry.
Legislation enacted by state lawmakers in 1990 established the “Emerging Crops Loan Program” by which thousands of poultry farmers have been able to get into the business or expand their businesses, the Mississippi Poultry Association says.
The Association puts the state’s poultry employment at 28,000 direct jobs and a nearly equal number of indirect jobs.
The next game changer was the Poultry Association’s creation of the “Ten Points List,” which details 10 practices that assure fairness and openness in dealings among poultry growers and integrator companies.
With its long-established vertical integration, Mississippi’s poultry sector annually reaches sales of around $2.5 billion in a process that allows a varied mix of fresh and frozen products. These include boneless breasts, chicken tenders, battered and breaded pieces and even marinated pieces.
The sector discovered a bonanza in global demand in the 1990s, Sanderson explained in the Poultry Association’s anniversary video.
Americans had always craved white meat but not much else. “That left us with huge parts without demand,” Sanderson recalled. “Then the Russians opened up in the 1990s. They preferred the dark meat. The price was right for them and right for us.
“This opened up multiple markets. We have seen continents – not just individual countries – open up to us.”
By 2010, Mississippi poultry exports reached a value of more than $314 million, or 11.2 percent of total sales, the Poultry Association says..
After Russian banned imports of U.S. broilers in late 2011, Mexico replaced Russia as the largest purchaser of U.S. poultry, adding four million pounds of broiler meat to the more than 967 million pounds of mostly dark meat shipped there in 2010, according to the Poultry Association.
Much of the dark meat from broilers processed at Sanderson Farms’ soon-to-open Palestine, Texas, plant will go to Mexico, the company says.
Hong Kong also became a significant consumer of U.S. broiler meat after the Russian boycott began. Exports there totaled 55.7 million pounds by October 2011, a 45 percent increase from the previous October.
Angola is another emerging market for U.S. poultry. In October 2010, U.S. shipments to the African nation totaled only 14.4 million pounds. However, one year later these shipments rose to 60.5 million pounds, a 320 percent increase.
The Poultry Association noted that the predominant use of ports in the South makes the poultry export market especially important for Mississippi.
BEFORE YOU GO…
… we’d like to ask for your support. More people are reading the Mississippi Business Journal than ever before, but advertising revenues for all conventional media are falling fast. Unlike many, we do not use a pay wall, because we want to continue providing Mississippi’s most comprehensive business news each and every day. But that takes time, money and hard work. We do it because it is important to us … and equally important to you, if you value the flow of trustworthy news and information which have always kept America strong and free for more than 200 years.
If those who read our content will help fund it, we can continue to bring you the very best in news and information. Please consider joining us as a valued member, or if you prefer, make a one-time contribution.Click for more info