Why vertical integration?
Poultry production has the highest degree of coordination or vertical integration of any livestock sector. Most broilers, eggs and turkeys are produced by growers who have detailed contractual agreements with processors or marketers. Some are grown in units owned directly by processing firms, mostly in the southern or southeastern United States. Hardly any are raised by purely independent farmers for sale in day-to-day spot markets. Why is there such a high degree of integration? Most livestock economists argue that technological innovations developed in the 1950s, innovations in genetics, in nutrition and in management, were most productive only if applied as a package. Furthermore, these innovations involved substantial economies of scale and implied scales that demanded more than the capital available to the average small farmer. Finally, these innovations resulted in products of more uniform characteristics, differentiated products that could be branded, trademarked and marketed in
