Breeder mergers-pros and cons?

Cobb-Vantress Inc., a subsidiary of Tyson Foods and one of the two leading primary broiler breeders has signed a memorandum of understanding with Hendrix Genetics BV. of the Netherlands. This company is a significant force in the international breeding market with an emphasis on egg-producing strains. According to the press release issued by Cobb-Vantress the association will involve a joint venture in broiler breeding with Cobb-Vantress acquiring the Hybro brand, sold extensively in Asia, Africa and the Middle East. The two companies will establish a program of cooperation in research and development. Ultimately a closer relationship representing a merger or acquisition will be considered. This developing association closely parallels the evolution of the genetics holdings of the Wesjohann Group of Germany which includes Aviagen with a focus on meat (Ross and Arbor Acres broilers and Nicholas and BUT turkeys) and the egg- production entities supplying Hy-Line and Lohmann brands.

Rationalization of the primary breeding sector of the world’s poultry industry is inevitable. The high cost of implementing selection programs, the increasing complexity of technology involving molecular genetics together with the highly competitive situation in the market place dictate joint ventures, evaluation and combination of primary lines and pooling of technical and distribution resources.

Consolidation since the turn of the Century has profound implications for poultry producers worldwide. The number of potential suppliers of breeding stock is decreasing. It might be inferred that this is a negative, since an oligopoly may reduce competition. It may also be held that the gene pool is shrinking as breeders emphasize the needs of their largest customers.

Reflection suggests otherwise. Joint ventures allow geneticists with different training and scientific orientation to combine their talents and resources. Large, well funded programs can afford to hold lines with specific traits which otherwise would be disposed of by companies with a smaller customer base. The expense of sophisticated computer technology, gene typing and ultimately gene transfer requires long-term commitment of funds to programs which translate basic research into practical reality. This in turn is predicated on achieving sales volume to justify expenditure many years in advance of commercialization. Large multinational primary breeders have the ability to distribute their lines in diverse areas reducing the risk of eradication in the event of catastrophic infections such as HPAI.

Observers and participants in the poultry industry should not question the desirability or disadvantages of mergers and consolidation but accept the financial realities driving the trend. Ultimately producers worldwide will benefit from creative advances of well executed programs offering performance, diversity and security. These attributes can only be offered by the application of emerging technology to the economic realities of primary breeding.