The study’s primary source of data is from individual broiler grow-out operations responding about operations in 2011 in the Agricultural Resource Management Survey (ARMS), which is jointly administered by the National Agricultural Statistics Service (NASS) and the Economic Research Service (ERS).
While the ARMS showed broiler grower household incomes higher than the average of other households, the range of incomes across contract growers is wider than the average for all farms, reflecting the risks that growers bear, the range of technologies and management skills in the business, and variations in off-farm income, according to the ERS analysts.
ERS researchers compared average incomes using the median, at which half of households earn less and half earn more. In 2011, the median income among all U.S. households was $50,504, while the median income among farm households was $57,050. The median for contract broiler growers was higher, at $68,455. Sixty percent of contract broiler growers earned household incomes that exceeded the U.S.-wide median.
Researcher James M. MacDonald said that among contract broiler growers, the 80th percentile of household income was $143,294, which is greater than the 80th percentile values for all farm households and for all U.S. households. But the 20th percentile value ($18,782) was less than the corresponding values for the other comparison groups. Therefore, the spread between the 80th and 20th percentile incomes was much greater for contract broiler growers than for all farm households or all U.S. households.
Why do broiler grower incomes vary so widely?
“Some of the variation in household incomes reflects differences in off-farm income earned by contract growers and their families,” MacDonald said. “On average, off-farm income accounts for half of the total household income earned by contract growers, and off-farm income varies widely.”
MacDonald said some of this variation may also reflect differences in the size of a grower’s broiler business. “One quarter of growers have one to two chicken houses, while a third had five or more. These two variations largely offset one another, in that growers with one to two houses derive 80 percent of their income from off-farm jobs, while growers with five or more houses derive over 60 percent of their income from the farm business.”
Income from contract growing fees — per pound of chickens produced — also varies widely and accounts for some of the variation in household incomes. “Contract fees can vary with attributes of production that also affect grower costs — for example, higher per-pound payments are associated with smaller birds, birds raised without antibiotics, and certified organic production. However, fees also vary because of the way that broiler production contracts are designed,” he said.
In 2011, the average payment to contract growers was 5.55 cents per live-weight pound delivered, but actual fees varied widely around the average. Twenty percent of growers earned more than 6.33 cents per pound, and 10 percent earned more than 7.02 cents per pound. At the other end of the spectrum, 20 percent of growers earned less than 4.77 cents per pound, and 10 percent earned less than 4.32 cents per pound, the researchers reported.
Average gross cash farm income from all sources was almost $233,000 for contract broiler growers in 2011, and $164,889 — or 71 percent of the total — came from production contract fees.