Economic and Marketing Information for Indiana Farmers (Mar. 30, 1963) |
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Economic and Marketing Information FOR INDIANA FARMERS Prepared by the Agricultural Staff of Purdue University, Lafayette, Indiana March 30, 1963 Ownership Integration In The Egg Industry1 by John P. H. Brand2 and Milton Snodgrass, Agricultural Economics M. An owner integrated egg industry would consist of large businesses producing and marketing commercial eggs. To have complete control over the egg until it reaches the retail store, the business must also own and control the major ingredients needed in egg production and processing. This includes a hatchery, brooding and rearing operation, source of feed, a feed processing mill and an egg processing facility. An owner integrated firm would own the production facilities at every stage and not rely on contractual arrangements. Today probably less than 5 percent of the nation's eggs are produced and distributed by owner integrated firms. However, the technological forces that have continually expanded the size of production units and concentrated production in the hands of fewer producers show no signs of decreasing. These forces will continue to exert pressures toward integrated arrangements from production to retail. Indiana has at least one completely owner integrated operation with a flock of 250,000 layers. Only 960 operations of this size could have met our nation's table egg requirements in I960.3 Research indicates there are at least five reasons that firm managers consider ownership integration. Stabilize Profit Integration may be an attempt to reduce the risk from price instability and increasing financial investments. Profit opportunities in the various operations (chicks, pullets, eggs) fluctuate over time. When one owner controls all operations he may change products to take advantage of short run price changes. Reduce Expenses Integration reduces the number of times certain functions are performed and often may reduce the cost and time associated with them. Buying and selling costs are the most obvious ones that may be reduced. The frequency of handling, grading, packing, accounting, transportation, storage, advertising, inventory maintenance, obtaining market information and credit bearing may also be reduced. Reduce Management Cost The costs of management may be reduced if managerial talents were not being utilized to capacity. However, spreading managerial talent to other operations may reduce its efficiency. Control Supplies Assurance of an internal supply of raw materials permits the integrated firm to better plan its production, to reduce production variability, to more fully use productive capacity and resources and to develop an adequate market. This is particularly important where fixed costs are relatively high. For example, refrigerated facilities must be large enough to handle daily egg production. Independ ent egg handlers who pick up eggs from many small producers may experience ron«ider.ihl<> variation in egg receipts. These handlers need to have refrigeration capacity large enough to handle peak collection. But. the integrated firm controling its internal supply may be able to operate with less capital investment in cooling facilities. Integration, in this context, is one way that the firm can maintain its competitive effectiveness and reduce the risk associated with large capital investments in facilities and equipment. Control Quality With retailers demanding uniform quality in cartoned eggs, quality control is vital in securing and holding market outlets. Egg quality and uniformity depends on such internal factors as feed rations and breeding characteristics of the laying hen. After the egg is laid, external factors, such as temperature and humidity, influence its quality. With direct control over the inputs and with control over egg processing, the quality of eggs reaching the retailer can he improved. 1 Based on research findings of Project 1082, Agricultural Experiment Station, Purdue University. 2 Now on staff at University of Connecticut. 3 This is based on a per capita shell egg consumption of 300 eggs, a civilian population of 180 million and a rate of lay of 225 eggs per year; the present rate of lay in the high production states of California and Washington.
Object Description
Title | Economic and Marketing Information for Indiana Farmers (Mar. 30, 1963) |
Purdue Identification Number | UA14-13-econ196303 |
Date of Original | 1963 |
Publisher | Purdue University. Agricultural Extension Service |
Subjects (LCSH) |
Farm produce--Indiana--Marketing Agriculture--Economic aspects--Indiana |
Genre | Periodical |
Collection Title | Extension Economic & Marketing Information (Purdue University. Agricultural Extension) |
Rights | Copyright Purdue University. All rights reserved. |
Coverage | United States - Indiana |
Type | text |
Format | JP2 |
Language | eng |
Repository | Purdue University Libraries |
Date Digitized | 04/01/2015 |
Digitization Specifications | Original scanned at 400 ppi on a BookEye 3 scanner using Opus software. Display images generated in Contentdm as JP2000s; file format for archival copy is uncompressed TIF format. |
URI | UA14-13-econ196303.tif |
Description
Title | Economic and Marketing Information for Indiana Farmers (Mar. 30, 1963) |
Purdue Identification Number | UA14-13-econ196303 |
Transcript | Economic and Marketing Information FOR INDIANA FARMERS Prepared by the Agricultural Staff of Purdue University, Lafayette, Indiana March 30, 1963 Ownership Integration In The Egg Industry1 by John P. H. Brand2 and Milton Snodgrass, Agricultural Economics M. An owner integrated egg industry would consist of large businesses producing and marketing commercial eggs. To have complete control over the egg until it reaches the retail store, the business must also own and control the major ingredients needed in egg production and processing. This includes a hatchery, brooding and rearing operation, source of feed, a feed processing mill and an egg processing facility. An owner integrated firm would own the production facilities at every stage and not rely on contractual arrangements. Today probably less than 5 percent of the nation's eggs are produced and distributed by owner integrated firms. However, the technological forces that have continually expanded the size of production units and concentrated production in the hands of fewer producers show no signs of decreasing. These forces will continue to exert pressures toward integrated arrangements from production to retail. Indiana has at least one completely owner integrated operation with a flock of 250,000 layers. Only 960 operations of this size could have met our nation's table egg requirements in I960.3 Research indicates there are at least five reasons that firm managers consider ownership integration. Stabilize Profit Integration may be an attempt to reduce the risk from price instability and increasing financial investments. Profit opportunities in the various operations (chicks, pullets, eggs) fluctuate over time. When one owner controls all operations he may change products to take advantage of short run price changes. Reduce Expenses Integration reduces the number of times certain functions are performed and often may reduce the cost and time associated with them. Buying and selling costs are the most obvious ones that may be reduced. The frequency of handling, grading, packing, accounting, transportation, storage, advertising, inventory maintenance, obtaining market information and credit bearing may also be reduced. Reduce Management Cost The costs of management may be reduced if managerial talents were not being utilized to capacity. However, spreading managerial talent to other operations may reduce its efficiency. Control Supplies Assurance of an internal supply of raw materials permits the integrated firm to better plan its production, to reduce production variability, to more fully use productive capacity and resources and to develop an adequate market. This is particularly important where fixed costs are relatively high. For example, refrigerated facilities must be large enough to handle daily egg production. Independ ent egg handlers who pick up eggs from many small producers may experience ron«ider.ihl<> variation in egg receipts. These handlers need to have refrigeration capacity large enough to handle peak collection. But. the integrated firm controling its internal supply may be able to operate with less capital investment in cooling facilities. Integration, in this context, is one way that the firm can maintain its competitive effectiveness and reduce the risk associated with large capital investments in facilities and equipment. Control Quality With retailers demanding uniform quality in cartoned eggs, quality control is vital in securing and holding market outlets. Egg quality and uniformity depends on such internal factors as feed rations and breeding characteristics of the laying hen. After the egg is laid, external factors, such as temperature and humidity, influence its quality. With direct control over the inputs and with control over egg processing, the quality of eggs reaching the retailer can he improved. 1 Based on research findings of Project 1082, Agricultural Experiment Station, Purdue University. 2 Now on staff at University of Connecticut. 3 This is based on a per capita shell egg consumption of 300 eggs, a civilian population of 180 million and a rate of lay of 225 eggs per year; the present rate of lay in the high production states of California and Washington. |
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