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The profitability of raising
broilers today depends
heavily on the rate of m-
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We’re Small Enough to be Concerned and Large Enough to H
Interest rates current key
broiler growout profits
terest you pay on the broiler' close look at the economics
house. Any grower con- involved. You may not be
templatmg construction of a able to realize a return on
new house should take a your investment and labor.
This is the conclusion of
University of Delaware ex
tension farm management
( specialist Don Tilmon after a
recent study of costs and
returns from broiler growout
operations on the Peninsula.
The study was initiated last
fall at the request of farmers
who wanted information on
the current profitability of
broiler production.
The growers were con
cerned about apparent
discrepancies m payments
from integrators under “new
house contracts” entered in
to over the last five years.
To answer their questions,
a survey was conducted of
broiler housing built m each
of the five years just prior to
1979. In addition, housing 10
years old and 15 years old
was also surveyed.
Altogether structures from
seven time periods were in
volved: 1964, 1969,1974,1975,
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1976,1977, and 1978,
The results of the study
show that while contract
payments to growers with
newer houses were higher
than those to growers with
older houses, the lower con
struction costs of these older
units yielded a net return to
labor and investment that
was comparable to that of
the newer ones.
GE~I
■■■■
Tilmon based his survey
on . financial information
taken from growers’ federal
tax returns for 1978 - the
most recent year for which
complete records were
available.
Farmers involved m the
study were selected at ran
dom from grower lists of in
tegrators representing ap
proximately 70 percent of
the broiler market on the
Shore. The number selected
from each list was propor
tionate to that company’s
share of the market. A total
of 160 houses were surveyed.
AIT but six were mcluded m
the analysis.
The survey was conducted
in cooperation with
members of the Peninsula
Poultry Growers Association
and the grower committee of
Delmarva Poultry Industry,
Inc. Funds to collect the data
were provided by DPI.
Data collected included:
5126, capacity and cost of
constructing and equipping
houses omit during each of
the seven time periods;
operating costs per thousand
birds and per square foot
paid by growers in 1978 in
houses built during each
tune period; and contract
payments to broiler growers
during the survey year
(1978).
To‘adjust for inflation of
building and equipment
costs over the 15-year con-
FAMOUS NECO
Viewed this way, the
results were quite surpris
ing. Contrary to many peo
ple’s expectations, costs and
returns were remarkably
constant, he says, regardless
of when houses were built.
For example, during 1978
average fixed costs to
produce 1000 birds ranged
from $lB.BB in a house built
during 1964 (investment
costs stated m 1964 dollars)
to $42.42 m a house built in
1978.
But when the 1964 dollars
were inflated to 1978 values,
the cost of producing birds in
the older unit was not that
different $40.43
In fact, the overall
average fixed cost per thou
sand birds produced in all
ages of housing surveyed
came to $43.53 when viewed
in 1978 dollars.
Cash returns per thousand
birds produced ranged from
$113.31 m 1964-built houses to
$131.45 m 1978 structures.
But when fixed costs were
subtracted and the amount
available for labor and in
terest stated in 1978 dollars,
the difference agam was not
that great: $62.12 in 1964
houses, $59.99 m 1978 houses.
When the cost of the
money invested m housing
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Lancaster Farming, Saturday, April 12,1980—D3
struction period, Tilmon
translated financial invest
ment data from each of the
previous years into 1978
dollars.
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'flighting mounted on
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2" Diameter tube on 8" Units
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to
and equipment was sub
tracted from this, the
amount remaining for labor
was amazingly constant. It
ranged from $33.28 per thou
sand birds (in 1978 dollars)
in units built m 1964 at 5.6 per
cent interest, to $35.92 m
buildings constructed in 1978
at 8.25 percent interest.
Tilmon’s conclusion:
“Among growers studied for
the 1978 tax year there is lit
tle difference in the net cash
revenue available for labor
and interest. The relative
well being of the broiler
grower is there for a func
tion of the interest he must
pay for his money.”
Looking beyond the survey
year to 1979, he added,
“Broiler housing built with
money costing more than
8.75 percent is in a relatively
poorer position than housing
built during earlier times at
lower rates.”
The economist says his fin
dings might have been quite
different had the study in
cluded the 1979 tax year.
This was not possible since
the survey was conducted
before 1979 returns were
filed. It was during 1979 that
mterest rates took their bijg
jump to 12 and 13 percent, i
Also, halfway through last
year the bottom fell out of
the broiler market and pro
duction was cut back. So
most growers didn’t average
(Turn to Page D 4)
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