The broiler industry in U.S.A. became more competitive because of the innovation in production process and the growth market, especially, after World War II. As the broiler production and other related phases that is mixed feed industry, chick hatchery, broiler processing plant and retail food store constitute the broiler industry, the competition around the broiler industry is complex in both horizontal and vertical marketing organization. In the competitive structure, as the product differentiation which come into effect to rnaintain the price level high is weak, various cost-reducing technologies were applied, and the development of contract farming and vertical integration promoted the adoption of these technologies.
After the national food chain sponsored loss-leader sales, the cost-reducing competition dominated all competition around the broiler industry. so that processing firm, feed mills and hatcheries declined in average unit cost by economies of scale, and many smaller and less efficiet firms were forced out. Advances in production technologies through genetic research and development improvment in poultry nutrition and improved management practices have enabled the broiler industry to produce a 3.5-pound broiler in 7 to 8 weeks instead of the 12 to 14 weeks with feed conversion of 2.1 pounds of feed per pound of live broiler compared to 4 ponds in 1940. The industry has been able to hold down or decrease many production and marketing costs because of economies of scale gained processing and other activities as well as improved efficiency in broiler production.
The emerging integrated structure of the broiler industry brought the exit of small independent firms because that first, narrowing profit margins put specialized hatcheries disadvantageous, independent feed dealers and local feed rnills next faced the price-cost squeeze, and finally, specialized independent processors faced the same problem. Feed was costly and feed dealer early found integration advantageous to extend credit by the competition within the feed mixing industry. As chain stores were developing such merchandising devices as loss-leader, the center of power of integration moved forward processors. For processing firm, direct contracting between the plant and the grower was the most profitable method of plant procurement because of the advantages of coordinating supply with processing. The typical integrated broiler firm has consisted of: (1) contract hatchery egg producers (2) a broiler chick hatchery (3) a feed mill which grinds and mixes feed ingradients and adds necessary medication and vitamins to the feed (4) contract broiler growers (5) company-owned or leased farm and (6) a processing plant including some sales and distribution function.
For interregional competition of the broiler producing areas, though the Delmarva broiler industry has long been a leader in the production and marketing in the eastern region of the nation, the Delmarva area produced more broilers than any state until 1954 when Georgia took the lead in production and since that time, Delmarva's share of the production dropped to less than 13 percent of the nine-area total and about 10 percent of national production.
Alabama, Arkansas, Georgia, Mississippi and North Carolina - the areas having the greatest absolute cost advantage over Delmarva - increased their cost advantage substantially in the Boston, New York, Philadelphia and Pittsburgh markets the major outlets for Delmarva broilers.