• TABLE OF CONTENTS
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 Copyright
 Title Page
 Table of Contents
 Introduction
 Purpose and method of study
 General characteristics and practices...
 Capital investment, receipts, expenses...
 Cost per chick sold by types of...
 Factors affecting costs and...
 Summary
 Acknowledgement
 Statistical tables






Group Title: Mimeo report - Department of Agricultural Economics, University of Florida - EC64-1
Title: An economic study of Florida hatcheries
CITATION PAGE IMAGE ZOOMABLE PAGE TEXT
Full Citation
STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/UF00071971/00001
 Material Information
Title: An economic study of Florida hatcheries
Series Title: Agricultural economics mimeo report Department of agricultural economics. Florida agricultural experiment stations
Physical Description: 64 p. : ; .. cm.
Language: English
Creator: Greene, R.E.L
Edman, V.G
Publisher: s.n.
Place of Publication: Gainesville
Publication Date: 1963
 Subjects
Genre: non-fiction   ( marcgt )
 Notes
Statement of Responsibility: by R.E.L. Greene, and V.G. Edman.
Funding: Agricultural economics mimeo report ;
 Record Information
Bibliographic ID: UF00071971
Volume ID: VID00001
Source Institution: Marston Science Library, George A. Smathers Libraries, University of Florida
Holding Location: Florida Agricultural Experiment Station, Florida Cooperative Extension Service, Florida Department of Agriculture and Consumer Services, and the Engineering and Industrial Experiment Station; Institute for Food and Agricultural Services (IFAS), University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: oclc - 67642519
clc - 000474543

Table of Contents
    Copyright
        Copyright
    Title Page
        Title Page
    Table of Contents
        Table of Contents
    Introduction
        Page 1
        Growth and development of the poultry industry
            Page 1
            Page 2
        The development of the hatchery industry in Florida
            Page 3
            Page 4
            Page 5
            Page 6
    Purpose and method of study
        Page 7
        Page 8
        Purpose of study
            Page 9
        Purpose of study
            Page 9
        Scope and method of study
            Page 9
            Page 10
            Page 11
    General characteristics and practices of hatcheries
        Page 12
        Type of hatchery, size and output
            Page 12
            Page 13
            Page 14
            Page 15
        Training and experience and allocation of managers' time
            Page 16
        Legal organization and growth pattern
            Page 17
            Page 18
        Hatching egg supply
            Page 19
            Page 20
            Page 21
            Page 22
            Page 23
            Page 24
        Sale of chicks and selling practices
            Page 25
            Page 26
            Page 27
            Page 28
            Page 29
            Page 30
            Page 31
        General policy and management practices relating to sales
            Page 32
            Page 33
    Capital investment, receipts, expenses and returns in hatchery operation
        Page 34
        Amount and distribution of capital investment
            Page 34
            Page 35
        Receipts
            Page 36
        Expenses
            Page 36
            Page 37
            Page 38
            Page 39
        Returns
            Page 40
    Cost per chick sold by types of chicks
        Page 41
        Egg-type chicks
            Page 42
            Page 43
        Meat-type chicks
            Page 44
            Page 45
            Page 46
    Factors affecting costs and returns
        Page 47
        Factors associated with operator's labor and mangement returns
            Page 47
        Relation of selected factors to returns to the operator for labor and management
            Page 48
            Page 49
            Page 50
            Page 51
        Comparison of returns in hatcheries by types of chicks produced
            Page 52
            Page 53
            Page 54
            Page 55
            Page 56
    Summary
        Page 57
        General characteristics and practices
            Page 57
        Capital investment, receipts, expenses and returns
            Page 58
        Factors affecting costs and returns
            Page 59
    Acknowledgement
        Page 60
    Statistical tables
        Page 61
        Page 62
        Page 63
        Page 64
Full Text





HISTORIC NOTE


The publications in this collection do
not reflect current scientific knowledge
or recommendations. These texts
represent the historic publishing
record of the Institute for Food and
Agricultural Sciences and should be
used only to trace the historic work of
the Institute and its staff. Current IFAS
research may be found on the
Electronic Data Information Source
(EDIS)

site maintained by the Florida
Cooperative Extension Service.






Copyright 2005, Board of Trustees, University
of Florida





October, 1963


Agricultural Economics
Mimeo Report EC 64-1


A SEcoaomic Study Of l/orida IHatcheries


R. E. L. Greene and Victor Gladden
Agricultural Economist and
Former Graduate Assistant


i .


Department of Agricultural Economics
Florida Agricultural Experiment Stations
Gainesville, Florida







TABLE OF CONTENTS


Page

INTRODUCTION . . . .. . 1

Growth and Development of the Poultry Industry. . 1
The Development of the Hatchery Industry in Florida . 3

PURPOSE AND METHOD OF STUDY . . . ..... 7

Purpose of Study. . . .. . 9
Scope and Method of Study . . . .... 9

GENERAL CHARACTERISTICS AND PRACTICES OF HATCHERIES . 12

Type of Hatchery, Size and Output . . .. 12
Training and Experience and Allocation of Managers' Time. 16
Legal Organization and Growth Pattern . . 17
Hatching Egg Supply . . ... 19
Sale of Chicks and Selling Practices. . . 25
General Policy and Management Practices Relating to Sales 32

CAPITAL INVESTMENT, RECEIPTS, EXPENSES AND RETURNS IN HATCHERY
OPERATION . . . . . . 34

Amount and Distribution of Capital Investment . 34
Receipts. . . . . . 36
Expenses. . . . . . 36
Returns . . . . . 40

COST PER CHICK SOLD BY TYPES OF CHICKS. . . 41

Egg-type Chicks . .. ...... .. 42
Meat-type Chicks . . . . 43

FACTORS AFFECTING COSTS AND RETURNS. . . . .. 47

Factors Associated with Operator's Labor and Management
Returns. . . . .47
Relation of Selected Factors to Returns to the Operator for
Labor and Management ............... 48
Comparison of Returns in Hatcheries by Types of Chicks
Produced . . . ... . .. 52

SUMMARY. . . . . . . . 57

General Characteristics and Practices . . .. 57
Capital Investment, Receipts, Expenses and Returns. . 58
Factors Affecting Costs and Returns .. . .. 59

ACKNOWLEDGMENTS. .. . . . 60

APPENDIX . . . . ....... 61

STATISTICAL TABLES . . . . . 61












AN ECONOMIC STUDY OF FLORIDA HATCHERIES


INTRODUCTION


Commercial hatcheries were in operation in the United States well
before the turn of the century. However, significant development and
growth of the industry did not begin until about 1920. In 1961 the
industry consisted of 3,513 hatcheries in which more than 2.6 billion
chicks were produced that sold for more than 380 million dollars.!/ The
rapid growth in size and number has resulted in a level of competition
that makes the application of sound business principles essential to
successful hatchery management.


Growth and Development of the Poultry Industry

The demand for baby chicks depends on the demand for eggs and
broilers. Expansion or contraction in the layer or broiler segments
of the poultry industry causes a similar response in the hatchery
segment. Trends in each of these furnish a background for describing
historical developments in the hatchery industry. Since most chicks are
raised relatively near to where they are hatched, poultry developments
in Florida are of particular significance in relation to Florida hatch-
eries. However, growth and development of the poultry industry in the
United States are also related.

Broiler production.--From 1940 to 1962, the number of broilers
produced in the United States increased 1,319 percent (Figure 1).
The most rapid gains came in the late forties and early fifties. A
decrease in number occurred in only two of the 23 years -- 1944 and
1946. Expressed in pounds of broilers produced, the increase was from
413 million to 6,919 million, or 1,573 percent.

The production of broilers in Florida also exhibited a general
upward trend, although to a lesser degree and with less consistency than
for the United States. From 1940 to 1962, number of broilers increased
295 percent. However, a decrease in number occurred in 8 of the 23
years. Since 1953, production has fluctuated from 10 to 12 million


1/ Egg and Poultry Statistics Through Mid-1961. Statistical
Bulletin No. 305, March 1962. Economic Research Service Statistical
Reporting Service, Agricultural Marketing Service, United States
Department of Agriculture.












AN ECONOMIC STUDY OF FLORIDA HATCHERIES


INTRODUCTION


Commercial hatcheries were in operation in the United States well
before the turn of the century. However, significant development and
growth of the industry did not begin until about 1920. In 1961 the
industry consisted of 3,513 hatcheries in which more than 2.6 billion
chicks were produced that sold for more than 380 million dollars.!/ The
rapid growth in size and number has resulted in a level of competition
that makes the application of sound business principles essential to
successful hatchery management.


Growth and Development of the Poultry Industry

The demand for baby chicks depends on the demand for eggs and
broilers. Expansion or contraction in the layer or broiler segments
of the poultry industry causes a similar response in the hatchery
segment. Trends in each of these furnish a background for describing
historical developments in the hatchery industry. Since most chicks are
raised relatively near to where they are hatched, poultry developments
in Florida are of particular significance in relation to Florida hatch-
eries. However, growth and development of the poultry industry in the
United States are also related.

Broiler production.--From 1940 to 1962, the number of broilers
produced in the United States increased 1,319 percent (Figure 1).
The most rapid gains came in the late forties and early fifties. A
decrease in number occurred in only two of the 23 years -- 1944 and
1946. Expressed in pounds of broilers produced, the increase was from
413 million to 6,919 million, or 1,573 percent.

The production of broilers in Florida also exhibited a general
upward trend, although to a lesser degree and with less consistency than
for the United States. From 1940 to 1962, number of broilers increased
295 percent. However, a decrease in number occurred in 8 of the 23
years. Since 1953, production has fluctuated from 10 to 12 million


1/ Egg and Poultry Statistics Through Mid-1961. Statistical
Bulletin No. 305, March 1962. Economic Research Service Statistical
Reporting Service, Agricultural Marketing Service, United States
Department of Agriculture.












Legend:
Pounds

--- Numbers


/
/
/


United States


w, --N /


Florida




/ I ^


S-0- --


1945


1950


1955


1960 1962


Fig. 1.--Number and Pounds of Commercial Broilers Produced in the
United States and Florida, 1940-1962.

Source: Selected Reports, Statistical Reporting Service, U. S.
Department of Agriculture.


3,00(


2,00(


1940
1940


____








birds per year with an increase and decrease in number on a two-year
cycle. On the basis of weight of broilers produced, production in-
creased from 8,400,000 pounds in 1940 to 37,936,000 pounds in 1962,
or 252 percent.

Egg production.--The number of hens and pullets in the United
States reached a high of nearly 396 million birds in 1944 and since
has gradually declined (Figure 2). Number of birds decreased in 13
of 18 years since 1944, with the greatest reduction of 7 percent in
1945. Although the 1962 hen and pullet population of approximately
298 million was one million less than the number in 1940, total egg
production increased 59 percent. This was due to improved breeding
and management practices which resulted in an increase in the annual
rate of lay per hen from 134 eggs in 1940 to 212 eggs in 1962 -- or
an increase of 58 percent (Figure 3).

During this 23 year period of increasing egg production, the pop-
ulation of the United States increased but at a slower rate than egg
production. From 1940 to 1945, the per capital consumption of eggs
increased rapidly to 402 eggs. In 1946 average consumption dropped
23 eggs per person. Consumption ranged from 383 to 392 eggs during
the 1947-51 period. A steady downward trend began in 1952. Per capital
consumption was 323 eggs in 1962, only about one percent above 1940.

In contrast with a relatively static situation in the United States,
the number of hens and pullets in Florida increased about 3.5 times
between 1940 and 1962 (Figure 2). From 1950 to 1961, there was a de-
crease in number in only three years compared with seven decreases for
the United States. Production per hen in Florida also increased more
than that of the United States. From an annual rate of 128 eggs per
bird in 1940 -- six below the national average -- production increased
to 218 eggs in 1962 -- six above the national average (Figure 3). Total
egg production for Florida increased from approximately 17 million dozen
in 1940 to 102 million dozen in 1959, or 498 percent.


The Development of the Hatchery Industry in Florida

Prior to 1940, Florida's hatchery industry increased slowly but
steadily in number and capacity.2/ There were 88 hatcheries in the
state in 1938 with a capacity of 1,698,000 eggs (Table 1). A decade
of very rapid expansion followed. This was due largely to the increased
demand for eggs and broilers brought on by World War II. With baby
chicks often in short supply, many poultrymen decided to include a
hatchery operation with their layer or broiler enterprises. Originally,


2/ The capacity of a hatchery is defined as the sum of the capaci-
ties of all operative incubators in the hatchery. Incubator capacity
is the manufacturer's rating of the number of eggs a machine will hold
including both incubating and hatching trays.










Legend:
- Dozens of Eggs

Hens and Pullets



S---- ------------
-_ __,,-


United States


/


Florida


1945 1950 1955


1960 1962


Fig. 2.--Average Number of Hens and Pullets During the Year and
Production of Eggs in the United States and Florida, 1940-1962.

Source: Selected Reports, Statistical Reporting Service, U. S.
Department of Agriculture.


Millions

6,000
5,000

4,000

3,000


1940
1940


_ _









Legend:
.Per Capita Consumption of
Eggs in the United States


Eggs per hen:
United States
Florida






's.
*^^o


I I I I I I I I I I .I I -- I I I *I I


1945 1950 1955


1960 1962


Fig. 3.--United States Per Capita Consumption of Eggs
Hen in the United States and Florida, 1940-1962.


and Eggs Per


Source: Selected Reports, Statistical Reporting Service, U. S.
Department of Agriculture.


/


130-


1940


-- -` ~`--- --









many envisioned this move only in the light of supplying their own
requirements, but readily available markets encouraged expansion to
commercial operations.

From 1938 to 1948 the number of hatcheries increased 53 percent,
but capacity increased 159 percent. The high point in numbers was
1948 with 135 hatcheries operating in the state. After 1948, there
was a rapid decline and only 37 hatcheries operated in 1959. However,
as for total capacity, an increase in average size more than offset the
decrease in number. In 1959, capacity per hatchery was 7.4 times the
average capacity in 1938, and total capacity at an all-time high of
5,314,000 eggs.


TABLE 1.--Number, Total and Average Capacity of Florida Hatcheries for
Selected Years, 1938 to 1959a

: :Egg Capacity
Yearb : Number of Total Average per
: Hatcheriesc :: Hatchery

1938 88 1,698,000 19,295
1943 96 2,500,000 26,041
1948 135 4,300,000 31,851
1953 69 4,770,715 69,141
1958 44 5,178,000 117,682
1959 37 5,314,000 143,622

aWhen data were collected in late 1960 and early 1961, 33 of
the 37 hatcheries reported in 1959 were still in operation. The
total egg capacity of these 33 hatcheries in the accounting period
used (calendar 1959 or the nearest fiscal year) was 5,289,740, an
average of 160,295 per hatchery.

bear beginning July 1.

cIncludes only members of National Poultry Improvement Plan
except 1938 and 1943 which includes all hatcheries.

Source: United States Department of Agriculture, Agricultural
Statistics (Washington, D. C.: U. S. Government Printing Office,
1939-60), and E. M. Funk and M. R. Irwin, Hatchery Operation and Manage-
ment (New York: John Wiley and Sons, 1955), pp. 27-28.









The number and value of chicks hatched in Florida has showed an
upward trend through the years (Table 2). The peak was reached in
1956 with a production of 35,457,000 chicks valued at $9,751,000.
Output in 1959 was 18 percent less than in 1956. However, total
receipts, which were influenced both by decreased production and prices,
dropped 57 percent. Chicks produced per hatchery increased steadily,
except for 1951 and 1957 when numbers dropped 9 percent in each of
the two years respectively. Average receipts per hatchery also in-
creased each year except for a decrease of 4 percent in 1950 and 40
percent in 1959.


TABLE 2.--Number of Chicks Produced, Average
Total and Average Receipts per Hatchery,


Number per Hatchery, and
Florida, 1948-1959a


: Number of Chicks Produced :Receipts
SAverage : Average
Year Total Average : Total Average
:Ye per Hatchery : per Hatchery

Thousands Thousands $1,000 $1,000
1948 13,800 170 2,705 33.4
1949 16,000 186 3,008 35.0
1950 17,000 195 2,924 33.6
1951 16,930 178 3,267 34.4
1952 20,872 224 4,362 46.9
1953 25,788 374 5,673 82.2

1954 30,000 500 7,590 126.5
1955 28,683 541 7,113 134.2
1956 35,457 669 9,751 184.0
1957 27,824 632 8,347 189.7
1958 30,374 690 8,505 193.3
1959 28,981 805 4,208 116.9


aIncludes only members of National Poultry Improvement Plan.

bear beginning July 1.

Source: U. S. Department of Agriculture, Agricultural Statistics
(Washington, D. C.: U. S. Government Printing Office, 1949-60).


PURPOSE AND METHOD OF STUDY


The main problem confronting the Florida hatchery industry in 1959
was a decrease in net returns. Average receipts per hatchery was nearly
40 percent below the preceding year, although the number of chicks sold
was up 17 percent. The cause was low chick prices, primarily in the
broiler segment of the industry. The average price of a broiler chick








in 1959 was 10.8 cents compared to 13.3 cents in 1958 and 14.5 cents in
1956 (Table 3). In April, 1959, the average price in Florida was 9.5
cents per chick and in neighboring Georgia, 6.7 cents.3/ The low point
of 9.0 cents was reached in Florida in May, with some orders reported
filled as low as 5.0 cents per chick. Market conditions for egg-type
chicks were affected to a much lesser degree. The 7 percent decrease
in 1959 incross pullet prices was partially offset by a 4 percent in-
crease in purebred pullet prices. Production of egg-type chicks in-
creased 31 percent over the preceding year.


TABLE 3.--Number of Chicks Hatched and Average Price per Chick by Type
of Chicks, Florida Hatcheries, 1955-1959

S Meat-Type Chicks Egg-Type Chicks
Year: Number Hatched : : Number Hatched Avg. Price of Pullets
:Total : Per : Avg. Price :Total : Per
: : Hatchery: per Chick : : Hatchery :Purebred :Incross

Thousands Cents Thousands Cents

1955 17,206 325 14.9 11,477 216 18.0a N. A.b
1956 28,189 532 14.5 7,268 137 17.9a N. A.
1957 20,522 466 12.2 7,302 166 21.0a 32.8a
1958 20,075 456 13.3 10,299 234 40.1 57.8
1959 17,950 499 10.8 11,031 306 42.7 53.8

aData reported on straight-run basis only until 1958. Straight-run
price equals approximately one-half pullet price.

information not available.

Source: U. S. Department of Agriculture, Agricultural Prices
(Washington, D. C.: U. S. Government Printing Office, 1955-59),
and U. S. Department of Agriculture, Egg and Poultry Statistics
(Washington, D. C.: U. S. Government Printing Office).

The nature of the baby chick market since the early fifties also
tended to encourage actions which created financial problems. Because
of favorable returns, considerable plant expansion occurred during the
decade and many hatchery owners planned additional expansion. Financial
arrangements for both actual and planned expansions were based on an
expected continued increase in gross income. Debt payments became an
extra burden under the cost-price squeeze situation in 1959. To further


3/U. S. Department of Agriculture, Agricultural Prices,
(Washington, D. C.: U. S. Government Printing Office, 1955-60).









complicate the problem, the basic causes of declining chick prices were
beyond the control of individual hatchery operators. Over a period of
approximately 20 years, major changes had taken place in the poultry
industry, especially in the broiler segment. The tremendous increase in
broilers produced resulted in falling prices which reached a critical
point in the late fifties.


Purpose of Study

Operators of business firms faced with declining net returns may
attempt to adjust their operations in a number of ways to improve their
relative position. At a given output, they may attempt to reshuffle
the factors of production so as to reduce per unit cost. With given
resources, they may attempt to produce a more profitable combination of
products, or they may attempt scale or size adjustments which lead to
increased economies of production. An analysis of management practices,
costs and returns may be a useful guide to such actions.

The specific objectives of this study are to (1) describe hatcheries
in Florida as to management practices and significant trends, (2) pre-
sent data on the organization of resources, (3) present empirical re-
sults of resource organization in terms of costs and returns and (4) eval-
uate practices and factors affecting costs and returns.


Scope and Method of Study

At the time of this study, there were 33 commercial hatcheries in
Florida, widely dispersed over the state (Figure 4). A division of the
state was made so that four areas were formed. Six hatcheries were
located in the Miami area, 11 in the St. Petersburg-Tampa area and Central
Florida, 11 in Northeast Florida including the Jacksonville area and the
remaining five hatcheries were scattered throughout West Florida.

The hatcheries ranged in size from 13,300 to 507,000 egg capacity.
They were divided into three groups on the basis of size. Capacity of
14 hatcheries was less than 100,000 eggs, 9 hatcheries 100,000 to 199,999
and 10 hatcheries 200,000 eggs or more (Table 4). These groups are
hereafter referred to as small, medium and large hatcheries, respectively.
There was no definite relation between location in the state and hatchery
size, but the highest percentage of small hatcheries was in West Florida
and large hatcheries in South Florida. Because of the small number and
wide variation in size and location of hatcheries, it was decided to
include the entire population in the study.

Type and method of collecting data.--A questionnaire was designed
consisting of two parts. Part one dealt with management practices which
were expected to affect profits. Information was sought as to training
and experience of the manager; date of origin and historical growth
pattern of the hatchery; extent of integration including related









complicate the problem, the basic causes of declining chick prices were
beyond the control of individual hatchery operators. Over a period of
approximately 20 years, major changes had taken place in the poultry
industry, especially in the broiler segment. The tremendous increase in
broilers produced resulted in falling prices which reached a critical
point in the late fifties.


Purpose of Study

Operators of business firms faced with declining net returns may
attempt to adjust their operations in a number of ways to improve their
relative position. At a given output, they may attempt to reshuffle
the factors of production so as to reduce per unit cost. With given
resources, they may attempt to produce a more profitable combination of
products, or they may attempt scale or size adjustments which lead to
increased economies of production. An analysis of management practices,
costs and returns may be a useful guide to such actions.

The specific objectives of this study are to (1) describe hatcheries
in Florida as to management practices and significant trends, (2) pre-
sent data on the organization of resources, (3) present empirical re-
sults of resource organization in terms of costs and returns and (4) eval-
uate practices and factors affecting costs and returns.


Scope and Method of Study

At the time of this study, there were 33 commercial hatcheries in
Florida, widely dispersed over the state (Figure 4). A division of the
state was made so that four areas were formed. Six hatcheries were
located in the Miami area, 11 in the St. Petersburg-Tampa area and Central
Florida, 11 in Northeast Florida including the Jacksonville area and the
remaining five hatcheries were scattered throughout West Florida.

The hatcheries ranged in size from 13,300 to 507,000 egg capacity.
They were divided into three groups on the basis of size. Capacity of
14 hatcheries was less than 100,000 eggs, 9 hatcheries 100,000 to 199,999
and 10 hatcheries 200,000 eggs or more (Table 4). These groups are
hereafter referred to as small, medium and large hatcheries, respectively.
There was no definite relation between location in the state and hatchery
size, but the highest percentage of small hatcheries was in West Florida
and large hatcheries in South Florida. Because of the small number and
wide variation in size and location of hatcheries, it was decided to
include the entire population in the study.

Type and method of collecting data.--A questionnaire was designed
consisting of two parts. Part one dealt with management practices which
were expected to affect profits. Information was sought as to training
and experience of the manager; date of origin and historical growth
pattern of the hatchery; extent of integration including related









complicate the problem, the basic causes of declining chick prices were
beyond the control of individual hatchery operators. Over a period of
approximately 20 years, major changes had taken place in the poultry
industry, especially in the broiler segment. The tremendous increase in
broilers produced resulted in falling prices which reached a critical
point in the late fifties.


Purpose of Study

Operators of business firms faced with declining net returns may
attempt to adjust their operations in a number of ways to improve their
relative position. At a given output, they may attempt to reshuffle
the factors of production so as to reduce per unit cost. With given
resources, they may attempt to produce a more profitable combination of
products, or they may attempt scale or size adjustments which lead to
increased economies of production. An analysis of management practices,
costs and returns may be a useful guide to such actions.

The specific objectives of this study are to (1) describe hatcheries
in Florida as to management practices and significant trends, (2) pre-
sent data on the organization of resources, (3) present empirical re-
sults of resource organization in terms of costs and returns and (4) eval-
uate practices and factors affecting costs and returns.


Scope and Method of Study

At the time of this study, there were 33 commercial hatcheries in
Florida, widely dispersed over the state (Figure 4). A division of the
state was made so that four areas were formed. Six hatcheries were
located in the Miami area, 11 in the St. Petersburg-Tampa area and Central
Florida, 11 in Northeast Florida including the Jacksonville area and the
remaining five hatcheries were scattered throughout West Florida.

The hatcheries ranged in size from 13,300 to 507,000 egg capacity.
They were divided into three groups on the basis of size. Capacity of
14 hatcheries was less than 100,000 eggs, 9 hatcheries 100,000 to 199,999
and 10 hatcheries 200,000 eggs or more (Table 4). These groups are
hereafter referred to as small, medium and large hatcheries, respectively.
There was no definite relation between location in the state and hatchery
size, but the highest percentage of small hatcheries was in West Florida
and large hatcheries in South Florida. Because of the small number and
wide variation in size and location of hatcheries, it was decided to
include the entire population in the study.

Type and method of collecting data.--A questionnaire was designed
consisting of two parts. Part one dealt with management practices which
were expected to affect profits. Information was sought as to training
and experience of the manager; date of origin and historical growth
pattern of the hatchery; extent of integration including related






-10-


West
Florida


Northeast
Florida


Central
Florida I


South
Florida


Fig. 4. --Location of commercial hatcheries in Florida, 1960.





-11-


businesses, franchises, egg supply and markets for chicks; egg supply
information including pricing methods, sources and problems of supply;
and markets including location, nature of purchasers, prices and dis-
counts. The second part was designed to obtain information on costs
and returns. Data were obtained on investment in plant and equipment,
eggs set and chicks hatched, and receipts and expenses for a year's
operation.


TABLE 4.--Number and Capacity of Florida Hatcheries by Size Groups, 1960

Variation in : Size of : Egg Capacity
Egg Capacity Hatchery : Number : Total : Average

13,300-99,999 Small 14 849,840 60,703

100,000-199,999 Medium 9 1,271,220 141,247

200,000-299,999 Large 4 950,000 237,500
300,000-399,999 4 1,311,680 327,920
400,000-499,999 1 400,000 400,000
500,000-507,000 1 507,000 507,000
Total or Average 33 5,289,740 160,295


Data were collected in late 1960 and early 1961 by personal
visitation to each hatchery. Information was obtained from hatchery
records and from opinions expressed by managers and owners. For most
hatcheries, the data were for the 1959 calendar year. If the accounting
period was a fiscal year, the most recent was used.

Number of records and method of analysis.--Data dealing with manage-
ment practices were obtained for 31 of the 33 hatcheries or 94 percent
of all hatcheries. Data on costs and returns were obtained for 20 of
31 or 64 percent of all hatcheries (Table 5). Complete schedules were
obtained for at least 60 percent of the hatcheries in all areas except
the Miami area. In that area, complete schedules were obtained for two
and management data for four hatcheries. The lowest percentage of com-
plete schedules was in the small hatchery group. This was true for two
main reasons. Some had a multiple enterprise operation with but one
set of records so hatchery data could not be separated with any degree
of accuracy. Other hatcheries kept records only of cash flows and could
not furnish data relating to number of eggs set, and chicks hatched,
sold or culled.

On the basis of percent of capacity, the poorest response was
48 percent -- also for small hatcheries (Table 6). Complete schedules
included 65 percent of capacity of the medium size group and 72 percent
of the large.

Data on general hatchery characteristics and management practices
are reported by size of hatchery. Data on financial operations of
hatcheries are presented as averages of all hatcheries and by size groups.





-12-


TABLE 5.--Number of Hatcheries, Number of Partial and Complete
and Percent Complete Schedules of all Hatcheries by Geographic
Size of Hatchery, Florida, 1959


Schedules
Area and


:Number of Schedules
: Percent
Item : : .. : Complete
: : Schedules
S Number of : Management : : of all
S Hatcheries : Data Only : Complete : Hatcheries

Area of State:
West 5 2 3 60
Northeast 11 3 8 73
Central 11 4 7 64
South 6 2 2 33
Total or Average 33 11 20 61

Egg Capacity:
13,300-99,999 14 5 7 50
100,000-199,999 9 3 6 67
200,000-507,000 10 3 7 70
Total or Average 33 11 20 61


Expenses are also shown by type of chicks. The hatcheries were grouped
by various factors which would be expected to affect costs and returns
to determine if an effect existed and to what extent. Interrelationships
between factors were also studied. The factors used are percent utili-
zation of capacity, percent salable hatch, labor expense per $100
receipts, investment per 1,000 egg capacity, type of chick produced and
selling price per chick.


GENERAL CHARACTERISTICS AND
PRACTICES OF HATCHERIES

For the most part, the material in this section is based on data
in part one of the schedule which was obtained for 31 hatcheries. Data
relating to the number of eggs set and number and types of chicks sold
could not be obtained from all hatcheries. These data are reported for
20 hatcheries for which complete schedules were obtained (Tables 8, 17,
18, 23 and 24). All hatcheries did not produce both types of chicks so
the number of hatcheries represented in each chick and size group varies.
Table 7 indicates the number of hatcheries in various size groups which
produced each type of chick.


Type of Hatchery, Size and Output


This section includes a number of descriptive statistics relating
to size of hatchery and to their product. Some such as eggs set and





-12-


TABLE 5.--Number of Hatcheries, Number of Partial and Complete
and Percent Complete Schedules of all Hatcheries by Geographic
Size of Hatchery, Florida, 1959


Schedules
Area and


:Number of Schedules
: Percent
Item : : .. : Complete
: : Schedules
S Number of : Management : : of all
S Hatcheries : Data Only : Complete : Hatcheries

Area of State:
West 5 2 3 60
Northeast 11 3 8 73
Central 11 4 7 64
South 6 2 2 33
Total or Average 33 11 20 61

Egg Capacity:
13,300-99,999 14 5 7 50
100,000-199,999 9 3 6 67
200,000-507,000 10 3 7 70
Total or Average 33 11 20 61


Expenses are also shown by type of chicks. The hatcheries were grouped
by various factors which would be expected to affect costs and returns
to determine if an effect existed and to what extent. Interrelationships
between factors were also studied. The factors used are percent utili-
zation of capacity, percent salable hatch, labor expense per $100
receipts, investment per 1,000 egg capacity, type of chick produced and
selling price per chick.


GENERAL CHARACTERISTICS AND
PRACTICES OF HATCHERIES

For the most part, the material in this section is based on data
in part one of the schedule which was obtained for 31 hatcheries. Data
relating to the number of eggs set and number and types of chicks sold
could not be obtained from all hatcheries. These data are reported for
20 hatcheries for which complete schedules were obtained (Tables 8, 17,
18, 23 and 24). All hatcheries did not produce both types of chicks so
the number of hatcheries represented in each chick and size group varies.
Table 7 indicates the number of hatcheries in various size groups which
produced each type of chick.


Type of Hatchery, Size and Output


This section includes a number of descriptive statistics relating
to size of hatchery and to their product. Some such as eggs set and





-13-


TABLE 6.--Capacity of All Hatcheries and Hatcheries for Which Management
Data only and Complete Schedules Were Obtained and Percent Capacity
of Hatcheries Covered by Complete Schedules of All Hatcheries, by Size
of Hatchery, Florida, 1959

: Capacity of Hatcheries
: Hatcheries Furnishing
Size of Hatchery: Complete Schedules
(Egg Capacity) : All : Management : : Percent of
: Hatcheries : Data Total : Capacity of All
: Only :Hatcheries

13,700-99,999 849,840 445,480 404,360 48
100,000-199,999a 1,271,220 267,000 824,220 65
20(,000-507,000a 3,168,680 572,400 2,276,280 72
total or Average 5,289,740 1 284,880 3,504,860 66

a
No data were obtained from one hatchery in group.


chicks hatched and sold are primarily a function of size. Others such
as type of chicks produced, percent utilization of capacity 4/ and
percent salable hatch 4/ are more a function of management. In this
section they are shown by size of hatchery but in a later section
these factors are related to other criteria to show their effects on
costs and returns.

Type of chicks produced.--There are three alternatives with respect
to type of chicks to produce. All meat-type may be produced. These
include the broiler breeds such as Plymouth Rock and various crossbreds.5/
Rhode Island Red and New Hampshire Red are included in meat-type, al--
though, they are more of a dual purpose breed. They are included because
in most cases they are sold unsexed just as the regular meat breeds and
their price corresponds more closely to meat than to egg-type chicks.

A hatchery may produce only egg-type chicks. This classification
includes strains of leghorns and various incrossbred types. 6/ Usually,
only pullet chicks of these breeds are sold. Partly because of the
greater expenses, prices average considerably above the meat types. A


4/ See footnotes a and b, Table 8 for explanation of terms.

5/ The common strains used in crossbreeding for meat are Red
Vantress, Vantress Cornish Cross, Vantress White Cornish Cross, Pet
White Cross and Martin's J. B. I.

6/ The incrossbred strains are Ames incross, DeKalb incross
and Wallace Hy-Line.





-14-


third alternative is to produce both types of chicks. This practice
creates no special problem and it may have the advantage of counter-
acting some of the seasonal demand which is more pronounced for egg-
than meat-type chicks.

Of the 31 hatcheries for which management data were obtained, 16
produced egg-type chicks, 6 meat-type and 9 both types (Table 7). Nine
of 14 small hatcheries and 5 of 8 medium hatcheries produced egg-type
chicks. Only one small and two medium hatcheries handled both types
contrasted with 6 of 9 large hatcheries that handled both'typds.

Four of seven small hatcheries and 5 of 6 medium hatcheries in the
20 hatcheries for which costs and returns data were obtained produced
egg-type chicks. Five of seven large hatcheries handled both types.
The percent of hatcheries producing both types of chicks was nearly the
same in the 20 hatcheries for which complete schedules were obtained as
for the 31 hatcheries indicating that the data for this group should be
representative of all hatcheries.


TABLE 7.--Number of Hatcheries Producing Various Type Chicks for Which
Management Data and Data on Costs and Returns Were Obtained by Size
of Hatchery, 31 Hatcheries, Florida, 1959

Type of Chick Size of Hatchery All Hatcheries
: Small : Medium : Large : Number : Percent

Hatcheries for Which Management Data Were Obtained

Egg 9 5 2 16 52
Meat 4 1 1 6 19
Both 1 2 6 9 29
Total 14 8 9 31 100

Hatcheries for Which Data on Costs and Returns Were Obtained

Egg 4 5 1 10 50
Meat 2 1 1 4 20
Both 1 0 5 6 30
Total 7 :6 7 20 100


Size and output.--The average capacity of the 20 hatcheries was
175,243 eggs, but varied from 58,000 in small hatcheries to 325,000 in
large hatcheries (Table 8). Percent utilization of capacity was only
27.0 in the medium size group but 70.9 in the large group. The per-
cent salable hatch was 75.4 for all hatcheries and varied little among
size groups.

About 288,000 salable chicks were produced per small hatchery.
The medium group averaged about one-third more and large hatcheries
nearly 10 times as many. Number of chicks sold averaged 159,000 for





-15-


small hatcheries, 246,000 for medium and 2,254,000 for large. Small and
medium size hatcheries sold approximately 70 percent egg-type and 30
percent meat-type chicks, but large hatcheries sold 85 percent meat-
and 15 percent egg-type chicks.


TABLE 8.--Average Capacity, Eggs Set per Year, Salable Chicks Hatched and
Number of Egg- and Meat-Type Chicks Sold by Size of Hatchery,20 Hatcherieq
Florida, 1959

Item Size of Hatchery All
tem : Small : Medium : Large : Hatcheries

Egg capacity 57,766 137,370 325,183 175,243
Eggs set per year 365,157 575,645 3,576,071 1,552,123
Percent utilization
of capacity 40.8 27.0 70.9 57.1
Salable chicks 287,866 438,767 2,678,464 1,199,081
Percent salable
hatch 78.8 76.2 74.9 75.4
Chicks sold:
Number:
Egg-type 111,229 177,146 343,073 212,149
Meat-type 48,243 68,596 1,910,737 706 222
Total 159,472 245,742 2,253,810 918,371

Percent:
Egg-type 70 72 15 23
Meat-type 30 28 85 77
Total 100 100 100 100


aTheorectically an incubator can hatch 17.4 batches of eggs per
year. In actual practice this is not possible because of time needed to
clean, load trays, etc. Among Florida hatcheries the most common
practice is to set eggs twice a week. This allows 2 days between each
setting plus Sunday or an average of 24 days. This plus the 21-day
incubation period totals 23; days and allows 15.5 hatches per year. This
figure is called hatchery turnover potential. The actual number of
hatches is called hatchery turnover.
In this study, percent utilization of capacity is used instead of
turnover. Percent utilization of capacity is obtained by dividing the
number of eggs set in one year by the number of eggs that could be set
in one year if running at capacity.
Percent utilization Number of eggs set in year 100
of capacity Hatchery capacity x 15.5
bSalable hatch was selected as the most meaningful expression of
hatchability. Salable chicks included all cockerals and extras but
excluded culls.
Percent salable Number of chicks hatched culls 00
hatch Number of eggs set




-16-


Training and Experience and Allocation
of Managers' Time

Most of the training and experience of hatchery managers came
through work experience rather than specialized schooling. Nearly half
of all managers moved or expanded from poultry farming into the hatchery
business (Table 9). This was particularly true in small hatcheries, where
nearly four-fifths were part of an integrated poultry operation. In all
size groups, approximately one-fourth of all managers received their
management training in other hatcheries. In medium and large-size
hatcheries, more than a third of the managers received their training
by working up in the hatchery they were managing. In some instances this
involved a father-son arrangement. Two of eight managers in the medium-
size group had moved from non-poultry vocations into hatchery management.


TABLE 9.--Source of Managers' Training, by Size of Hatchery, 31
Hatcheries, Florida, 1959

Source of Training Size of Hatchery All
S Small Medium : Large : Hatcheries

Number Reporting

In other hatcheries 3 2 3 8
In related poultry fields 11 1 3 15
Worked up in this hatchery .. 3 3 6
In nonrelated fields .. 2 .. 2
Total 14 8 9 31
Percent of Total

In other hatcheries 21 25 33 26
In related poultry fields 79 12 33 48
Worked up in this hatchery .. 38 33 19
In nonrelated fields .. 25 .. 7
Total 100 100 100 100100


Managers of small hatcheries divided their time approximately
equally between hatchery management and other duties (Table 10). Those
of medium and large hatcheries devoted about two-thirds of their time
to hatchery management. Managing a breeding flock was the most common
duty performed in addition to hatchery management. Raising started
pullets was the second most common duty performed. Managing a com-
mercial laying flock was of importance among managers of small hatcheries.
Over one-fourth of all managers had business duties more or less unrelated
to the poultry industry. Broiler raising and general farming were of
minor importance in all size groups.





-17-


TABLE 10.--Allocation of Managers' Time and Duties Performed by Managers
in Addition to Hatchery Management, by Size of Hatchery, 31 Hatch-
eries, Florida, 1959

Item Size of Hatchery All
: Small : Medium : Large : Hatcheries
Allocation of Managers' Time:
Percent devoted to:
Hatchery management 45 71 65 57
Other businesses 55 29 35 43
Total 100 100 100 100

Number Performing
Duties Performed by Managers in
Addition to Hatchery Management:
Managing:
Breeding flock 14 4 5 23
Commercial laying enterprise 9 1 1 11
Broiler enterprise .. 1 .. 1
Raising started pullets 8 3 4 15
General farming 2 1 .. 3
Other business 5 1 3 9

Percent Performing
Managing:
Breeding flock 100 50 56 74
Commercial laying enterprise 64 13 11 35
Broiler enterprise .. 13 .. 3
Raising started pullets 57 38 44 48
General farming 14 13 .. 10
Other business 36 13 33 29


Legal Organization and Growth Pattern


Sixty-four percent of the hatcheries in the small size group and
50 percent in the medium size group were organized as a single proprietor-
ship (Table 11). Fifty-six percent of the large hatcheries were organized
as corporations. Only five of the 31 hatcheries were organized as partner-
ships.

In 1959 the average small hatchery had been in operation 14 years,
four years longer than the average of the other two groups (Table 12).
All hatcheries but two small and one medium had made additions to capacity.
The greatest addition was in the large size group. This would be expected
because hatcheries making the most additions tended to grow out of a
smaller into a larger size group, The year of the latest expansion was
1955 in small hatcheries, 1956 in medium and 1957 in the large group,
Large hatcheries averaged 42 times their original size.





-18-


TABLE ll.--Legal Organization, by Size of Hatchery, 31 Hatcheries,
Florida, 1959

Organization Size of Hatchery : All
SSmall : Medium : Large Hatcheries

Number Reporting

Single proprietorship 9 4 2 15
Partnership 2 1 2 5
Corporation 3 3 5 11
Total 14 8 9 31

Percent of Total

Single proprietorship 64 50 22 48
Partnership 14 12 22 16
Corporation 22 38 56 36
Total 100 100 100 100


TABLE 12.--Age of Hatcheries, Number Reporting and Average Number of
Additions and Year of Last Addition, by Size of Hatchery, 31
Hatcheries, Florida, 1959

Item : Size of Hatchery
: Small : Medium Large

Average age (years) 14 10 10

Number reporting additions 10 7 9
Average number of additions 2.9 3.6 4.0
Year of last addition 1955 1956 1957
Percent increase over original capacity 219 1177 4234


Changes resulting from expansion.--In hatcheries where expansion
had taken place, managers were asked to enumerate changes resulting from
increase in capacity. In small hatcheries the four changes reported
most frequently were the use of larger units of equipment, economies in
purchasing, introduction of automatic machinery, and the employment of a
financial specialist or accountant (Table 13). The introduction of
large units of equipment and mechanized internal transport systems, ex-
pansion of market areas and establishment of contracts in either pur-
chasing or marketing, were changes listed most frequently by managers
of medium size hatcheries. Managers of large hatcheries felt that a
better use of labor was the most important change. Expanded market areas,
the addition of an assistant manager and the introduction of automatic
machinery were also other important changes.

Unused facilities.--An unused facility was considered to be any
equipment or part of a plant that remained idle throughout the entire





-19-


TABLE 13.--Major Changes Resulting from Additions to Capacity, by Size
of Hatchery, 31 Hatcheries, Florida, 1959

: Size of Hatchery
Item : Small : Medium : Large

Number
Number adding to capacity 10 7 9
Changes resulting:
Better use of labor 4 3 7
Introduction of automatic machinery 6 4 6
Introduction of assembly line techniques .. 1 4
Mechanized internal transport system 5 5 3
Larger units of equipment 9 5 5
Addition of an assistant manager 1 2 6

Addition of a marketing specialist 3 2 5
Addition of a financial specialist 6 3 5
Addition of field men 2 1 4
Expanded market area 4 4 6
Contracts in purchasing or marketing 3 4 4
Economies in purchasing 7 3 5


year. Although large hatcheries had greatly expanded capacity, two-
thirds had no unused facilities (Table 14). Of the three which had
unused facilities, only one indicated it to be incubator space. The
medium hatcheries had the highest percent of unused facilities. Managers
of four or five hatcheries reporting unused facilities stated it to be
incubator capacity.

Plans for additions to capacity.--In the medium and large size
hatchery groups where growth had been extensive and rapid there were
no plans for expansion (Table 15). About four-fifths of the managers
of small hatcheries also indicated no plans to add to capacity. The
three managers of small hatcheries who planned expansion gave increased
demand for chicks as their reason and 1961 as the year of the expected
expansion. Two managers who had decided on the amount of expansion
indicated about 60,000 eggs. This was slightly more than the average
size for the small hatchery group and would result in an approximate
doubling of size.


Hatching Egg Supply

Sources and geographic distribution.--Based on the relationship
or arrangement between the hatchery and the egg supplier, there were
four sources of hatching eggs: (1) an integrated ownership of the
hatchery and breeding flocks, (2) a contractual arrangement between the
hatchery and a breeding flock owner, (3) from owners of noncontract
flocks and (4) from dealers. Several hatcheries used more than one of





-20-


TABLE 14.--Extent and Type of Unused Facilities by Size of Hatchery, 31
Hatcheries, Florida, 1959

Item : Size of Hatchery
S Small : Medium :Large

Hatcheries reporting unused facilities:
Number 5 5 3
Percent 36 63 33

Number reporting by type of facility:
Incubator capacity 3 4 1
Floor space 2 1 1
Warehouse space .. 1


TABLE 15.--Plans to Add to Capacity in the Immediate Future by Size of
Hatchery, 31 Hatcheries, Florida, 1959

Item : Size of Hatchery
: Small : Medium : Large

Hatcheries reporting plans to add to capacity:
Number 3
Percent 21

Hatcheries reporting no plans to add to
capacity:
Number 11 8 9
Percent 79 100 100

Reasons for not adding to capacity:
No markets 6 5 7
No desire 2
No sexing facilities 1
Desire to maintain high quality 1
Desire to maintain family operation 1
Lack of capital 2
City zoning laws .. 1
Reached capacity of building .... 2
Total 11 8 9


these arrangements. In the case of noncontract flocks, eggs were pur-
chased from a breeding flock owner but neither party was tied to any
commitments beyond the immediate transaction. Dealers acted as middle-
men between the hatcheries and flock owners and in most cases eliminated
contracts between them.

Most of the egg-type eggs used in small hatcheries, three-fourths
in medium and one-fifth in large hatcheries were produced by hatchery-
owned flocks (Table 16). The other one-fourth of the supply for medium





-21-


hatcheries came fron noncontract flocks. Contract flocks and dealers
furnished about 40 percent of the supply of large hatcheries. All meat-
type eggs used in small and medium hatcheries came from their own flocks.
About four-fifths of the meat-type eggs used in large hatcheries came
from contract flocks and the remainder from hatchery-owned flocks or
dealers.


TABLE 16.--Sources of Hatching Eggs by Types of Chicks and Size of
Hatchery, 20 Hatcheries, Florida, 1959

Source :Size of Hatchery : All
: Small. : Medium : Large : Hatcheries


Egg-Type Chicks


Number of Eggs:
Hatchery flocks
Contract flocks
Noncontract flocks
Dealer
Total

Percent of Total:
Hatchery flocks
Contract flocks
Noncontract flocks
Dealer
Total


Number of Eggs:
Hatchery flocks
Contract flocks
Noncontract flocks
Dealer
Total

Percent of Total:
Hatchery flocks
Contract flocks
Noncontract flocks
Dealer
Total


2,029,649

9,698

2,039,347


99.5

.5

100.0


473,869



473,869


100.0



100.0


2,174,812

703,328

2,878,140


1,256,524
2,548,024

2,718,996
6,523,544


75.6


19.3
39.1


24.4
41.6
100.0 100.0
Meat-Type Chicks


575,730 2,705,867
14,957,271


575,730


100.0



100.0


829,759
18,492,897


5,460,985
2,548,024
713,026
2,718,996
11,441,031


47.7
22.3
6.2
23.8
100.0


3,755,466
14,957,271

829,759
19,542,496


14.6
80.9

4.5
100.0


19.2
76.5

4.3
100.0


The supply of hatching eggs came from six states, but all meat-
type and more than 95 percent of egg-type eggs used in small and medium
hatcheries were obtained in Florida (Table 17). Large hatcheries
obtained 39 percent of their egg-type eggs from Indiana, three percent
from New York and the rest locally. Their meat-type eggs came from
Florida, Alabama, North Carolina, Georgia and Indiana.





-22-


TABLE 17.--State of Origin of Hatching Eggs by Types of Chicks and Size
of Hatchery, 20 Hatcheries, Florida, 1959

State : Size of Hatchery All
: Small : Medium : Large : Hatcheries


Number of Eggs:
Florida
Georgia
Alabama
Indiana
New York
Total

Percent of Total:
Florida
Georgia
Alabama
Indiana
New York
Total


Number of Eggs:
Florida
Georgia
Alabama
Indiana
North Carolina
Total

Percent of Total:
Florida
Georgia
Alabama
Indiana
North Carolina
Total


2,029,649

9,698


2,039,347


2,737,474
140,666



2,878,140


99.5

0.5


100.0


95.1
4.9



100,0


Egg-Type


3,804,548


2,527,665
191,331
6,523,544


8,571,671
140,666
9,698
2,527,665
191,331
11,441,031


58.3


38.7
3.0
100.0


74.9
1.2
0.1
22.1
0.7
100.0


Meat -Type


473,869




473,869


100.0




100.0


575,730 5,915,113
2,533,740
4,815,938
1,629,530
3,598,576
575,730 18,492,897


100.0




100.0


6,964,712
2,533,740
4,815,938
1,629,530
3,598,576
19,542,496


32.0
13.7
26.0
8.8
19.5
100.0


35.6
13.0
24.7
8.3
18.4
100.0


Egg purchase contracts.--Egg purchase contracts were used only by
hatcheries in the large size group. These were either formal written
contracts with flock owners or informal agreements, which in some cases
were oral. If oral, there was usually a written statement setting forth
minimum standards, pricing policy or other information. The statement
was merely for information and not signed.

Four of eight large hatcheries in which egg-type chicks were pro-
duced contracted for a part of their hatching eggs (Table 18). Three
had seven written contracts and one had three informal contracts. Five





-23-


of the seven hatcheries in which meat-type chicks were produced con-
tracted for a part or all of their egg supplies. Two had a total of
60 written contracts and three had 19 informal contracts.

The provisions of both formal and informal contracts were very
similar. In general, the standards were the same as those used for
hatchery owned flocks. Managers of two hatcheries stated they had higher
requirements for their own flocks. There were some indications of
flexibility in standards of self-owned flocks. Minor requirements could
be relaxed in times of egg shortages. In times of egg surpluses, the
situation could be relieved somewhat by more stringent observance of
standards.


TABLE 18.--Number, Nature and Terms of Egg Purchase Contracts
Owners by Type of Eggs, 9 Large Hatcheries, Florida, 1959


with Flock


Item : Egg : Meat
SType Type

Informal contracts:
Number of hatcheries with contracts 1 3
Number of contracts 3 19
Formal contracts:
Number of hatcheries with contracts 3 2
Number of contracts 7 60
Number of hatcheries making contracts
with terms specifying:
Inspection of flocks by hatchery 4 5
Flocks kept free of disease 4 5
Hatchery selection of breeding males 4 5
Hatchery culling of flock 4 5
Egg storage temperature 4 5
Egg storage humidity 4 5

Ration requirements 4 3
Number of cocks per 100 hens 4 5
Vaccination program 4 3
Flock owner must grade eggs 4 5
Flock owner must deliver eggs 2 2
Only the breeding flock on farm 4 5


Problems of egg supply.--Most hatcherymen felt that their egg
supply problems were relatively minor but they tended to increase
with hatchery size. Quality of eggs, which included such character-
istics as hatchability and the presence of egg-transmitted diseases,
was enumerated as a problem of 37 percent of the hatchery operators
in the medium size group and 44 percent in the large group (Table 19).
Managers of two large hatcheries said they had difficulty at certain
times of the year in obtaining sufficient eggs of particular strains or
breeds but the problem was usually solved by substituting similar strains.





-24-


The egg supply problem mentioned most often, but one generally
regarded as an unavoidable part of the business, was that of adjusting
supplies to the demand for chicks. Fifteen of 31 hatcherymen interviewed
mentioned this problem. They were questioned as to a solution. Managers
of about two-thirds of the small, three-fourths of the medium and half
of the large hatcheries said they set eggs only to order (Table 19).
Three small and one large hatchery set all the eggs obtained from their
own flocks and booked orders against this amount. Managers of one small,
one medium and two large hatcheries attempted to estimate needs and set
eggs accordingly. One hatcheryman in each size group said they ran
their machines full when operating but they made some adjustments in
that their percent utilization of capacity was less than 100 percent.


TABLE 19.--Major Problems Connected with Egg Supply and Methods of
Determining the Number of Eggs to Set, by Size of Hatchery, 31
Hatcheries, Florida, 1959

Item : Size of Hatchery
: Small : Medium : Large

Problems connected with egg supply:
Number reporting:
Adjusting supply to demand 6 3 6
Quality of eggs .. 3 4
Obtaining desired breed or strain ...
Other .... 1

Percent reporting:
Adjusting supply to demand 43 37 67
Quality of eggs .. 37 44
Obtaining desired breed or strain .. .. 22
Other .. .. 11

Method of determine number of eggs to set:
Number reporting:
To order only 9 6 5
Set all eggs from own flocks 3 .. 1
Estimate needs 1 1 2
Run machines full 1 1 1
Total 14 8 9


Methods of pricing hatching eggs.--Three methods were used to
establish the price of hatching eggs -- a premium over a fresh market,
a definite price set for a year at the time and price adjusted on the
basis of hatchability. More than one of these methods were used by some
hatcherymen. About half of the hatcherymen in each size group based the
price of egg-type eggs on the market price of fresh table stock eggs
plus a premium (Table 20). Tampa, Chicago and New York were the fresh
egg markets used most as a base. Two medium and three large hatcheries
established egg prices a year at a time. Managers of two medium




-25-


hatcheries used hatchability as a basis for pricing, but this method was
normally used in combination with some other method with a premium or
discount being paid depending on whether hatchability was above or be-
low an established norm. Meat-type egg prices were most commonly set
based on a fresh egg market price plus a premium. A system based on
hatchability was the second most popular. An established price set
for the year was used by the fewest hatcheries.

Where a breeding flock was part of the hatcheryman's operation,
normally no price or value was put on the eggs for accounting purposes
since the entire operation was run as an integrated business. This was
the case in eight hatcheries for egg-type eggs and four for meat-type.


TABLE 20.--Methods of Establishing Price of Hatching Eggs by Type of Eggs
and Size of Hatchery, 31 Hatcheries, Florida, 1959

Method Size of Hatchery
: Small : Medium : Large

No. No. No.
Report- Report- Report-
ing ing ing
Egg-Type

Premium over a fresh egg market 3 4 4
One price established for year .. 2 3
Price based wholly or partly on hatchability .. 2
Produce own eggs and no value established 7 .. 1

Meat-Type

Premium over a fresh egg market 2 .. 3
One price established for year .. 2
Price based wholly or partly on hatchability .. 1 3
Produce own eggs and no value established 3 1


Sale of Chicks and Selling Practices


Selling practices employed by managers of various hatcheries were
influenced by such factors as types of chicks produced and where and to
whom the chicks were sold. It is assumed that the objective of each
manager was to establish and maintain a profitable volume of sales,
however, it was difficult to determine those policies most effective in
reaching such a goal.

Outlets.--Chicks were marketed through four outlets -- independent
farmers, wholesalers, contract growers and hatchery owned farms.
Independent farmers were poultrymen in business for themselves. They
obtained their own financing, provided their own facilities and main-
tained no commitments with any hatchery. They purchased 54, 71 and





-26-


61 percent of the egg-type chicks sold by small, medium and large
hatcheries, respectively (Table 21). This group purchased only 5.3
percent of meat-type chicks, although, they purchased 50 percent of
such chicks sold by medium hatcheries.


TABLE 21.--Outlets for Chicks by Type of Chick and Size of Hatchery, 20
Hatcheries, Florida, 1959

Outlet : Size of Hatchery : All
: Small ; Medium : Large : Hatcheries


Egg-Type Chicks


Number of Chicks:
Independent farms
Hatchery owned farms
Wholesalers
Contract growers
Total

Percent of Total:
Independent farms
Hatchery owned farms
Wholesalers
Contract growers
Total


Number of Chicks:
Independent farms
Hatchery owned farms
Wholesalers
Contract growers
Total

Percent of Total:
Independent farms
Hatchery owned farms
Wholesalers
Contract growers
Total


419,689
34,452
324,460

778,601


53.9
4.4
41.7

100.0


5,296
145
332,258

337,699


1.6
0.0a
98.4

100.0


751,591
15,020
296,262

1,062,873


70.7
1.4
27.9

100.0


1,457,942
36,682
906,888

2,401,512


60.7
1.5
37.8

100.0


2,629,222
86,154
1,527,610

4,242,986


62.0
2.0
36.0

100.0


Meat-Type Chicks


205,786
205,786


411,572


50.0
50.0


100.0


544,750

12,039,365
791,045
13,375,160


755,832
205,931
12,371,623
791,045
14,124,431


4.1

90.0
5.9
100.0


5.3
1.5
87.6
5.6
100.0


Less than .05 percent.


Wholesalers were an important outlet for both types of chicks. The
most common type was a feed dealer who handled chicks as a part of his
business. They handled roughly one-third of the egg-type chicks in each
size group. Wholesalers were the major outlet for meat-type chicks,
handling 98 percent for small, 90 percent for large and 50 percent for
medium size hatcheries.




-27-


No egg-type chicks were sold to contract growers. This was an
outlet for nearly 6 percent of the meat-type chicks of large hatcheries.
Hatchery owned farms were an outlet for only a relatively small percent
of chick sales, except meat-type chicks of medium hatcheries, who market-
ed half of their output through this outlet. Some hatcheries had re-
sorted to owning poultry farms in order to have a place to put surplus
chicks while others made such farms a regular part of their operation.

Distribution.--Most egg-type chicks were sold in Florida -- 88
percent for small hatcheries, 75 for medium and 61 percent for large
(Table 22). Georgia, Alabama and foreign countries received the re-
mainder. Export sales were important only in large hatcheries which
exported 25 percent of their egg-type chicks. Nearly 16 percent of all
egg-type chicks were exported.


TABLE 22.--Area of


Chick Sales by Type of Chicks and Size of
20 Hatcheries, Florida, 1959


Outlet : Size of Hatchery : All
: Small : Medium : Large : Hatcheries
Egg-Type Chicks


Number of Chicks:
Florida
Georgia
Alabama
Export
Total

Percent of Total:
Florida
Georgia
Alabama
Export
Total


Number of Chicks:
Florida
Georgia
Alabama
Export
Total
Percent of Total:
Florida
Georgia
Alabama
Export
Total


685,248
67,396
7,934
18,023
778,601


88.0
8.7
1.0
2.3
100.0


336,973
726


337,699


99.8
0.2


100.0


797,279
115,599
102,444
47,551
1,062,873


75.0
10.9
9.6
4.5
100.0


1,465,486
188,197
143,666
604,163
2,401,512


61.0
7.8
6.0
25.2
100.0


2,948,013
371,192
254,044
669,737
4,242,986


69.5
8.7
6.0
15.8
100.0


Meat-Type Chicks


275,754
135,819


411,573


67.0
33.0


100.0


6,265,460
1,103,067
2,732,033
3,274,600
13,375,160


6,878,187
1,239,612
2,732,033
3,274,600
14,124,432


46.8
8.2
20.4
24.6
100.0


48.7
8.8
19.3
23.2
100.0


Hatchery,


-- -





-28-


Meat-type chicks from small hatcheries were nearly all sold in
Florida. Two-thirds of those in medium hatcheries were sold in Florida
and one-third in Georgia (Table 22). Meat-type chicks in large hatch-
eries were sold in the same area as egg-type except the relative impor-
tance varied. About one-half were sold in Florida, one-fourth exported,
one-fifth in Alabama and the remainder in Georgia.

Contract selling.--Contractual agreements existed between some
hatcheries and wholesalers and/or contract growers. When a contract
was used, the connection between the hatchery and the outlet was more
formal than the usual supplier-customer relationship.

Fifteen of the 31 hatcheries had contracts with wholesalers that
applied to all egg- and meat-type chicks produced (Table 23). Contracts
were used by half of the small and medium hatcheries and 44 percent of
the large. Most of the contracts were with Florida wholesalers, but
Georgia and Alabama were also represented. One hatcheryman in each of
the medium and large group contracted with a wholesaler in a foreign
country. Wholesalers were given a discount on the chicks they bought,
which was approximately their profit. The amount of the average dis-
count was 2.4 cents per chick in small hatcheries, 2.7 cents in medium
and 3.0 in large. The difference in discount was influenced to some
extent by variation in the proportion of egg- and meat-type chicks sold.


TABLE 23.--Extent and Nature of Contracts with Chick Wholesalers and
Location of Wholesalers by Size of Hatchery, 31 Hatcheries,
Florida, 1959

Stem : Size of Hatchery
...Item Small : Medium : Large

Number of hatcheries having:
No contracts with wholesalers 7 4 5
Contracts with wholesalers:
Oral 5 2 3
Written 2 2 1
Average number of contracts per hatchery 8.4' 8.2 2.5
Number of hatcheries contracting
with wholesalers in:a
Florida 5 3 4
Georgia 2 .. 2
Alabama 2 .. 2
Foreign .. 1 1
Average discount to wholesalers
(cents per chick) 2.4 2.7 3.0


aSome hatcheries had contracts with wholesalers
one location,


in more than





-29-


Contracts with growers were used only to a limited extent with
only one small, two medium and two large hatcheries holding grower con-
tracts (Table 24). Four of the five contracts contained provisions
pertaining only to chick financing. One contract held by a hatchery
in the large group established the price of chicks on the basis of
their value when marketed and provided for a system of profit sharing
between the hatchery and the grower.


TABLE 24.--Extent and Nature of Contracts with Growers, by Size of Hatch-
ery, 31 Hatcheries, Florida, 1959

Item : Size of Hatchery
Small : Medium : Large
Number

Number of hatcheries having:
No contracts with growers 13 6 7
Contracts with growers 1 2 2
Main provision of contracts:
Conditional sales or other types of financing 1 2 1
Established price of chicks or broilers .. 1


Franchises.--A franchise gives a hatchery the right to obtain
and sell a patented strain of chicks which have been developed by a
specialized breeder. Franchises are common in hatcheries producing
egg-type chicks. Several hatcherymen said they would be unable to stay
in the business without one. Managers were in agreement that the two
major benefits from holding a franchise were a superior product due to
the breeding that had gone into establishing a strain, and the value re-
sulting from advertising carried on under a franchise label.

Twenty-four of 25 hatcheries that produced egg-type chicks operated
under a franchise (Table 25). Two hatcheries had two franchises. Four-
teen patented breeders were represented. One franchise was held by five
different hatcheries and two others were held by four each. Some fran-
chises carried a geographical limitation as to the geographical area in
which chicks could be sold but nine out of 26 were permitted unlimited
sale areas. However, factors such as transportation costs tended to
set geographical limits.

Hatcherymen had to pay for the privilege of holding a franchise.
The most common method of payment was a royalty which usually was a
specified amount per pullet chick sold or a percentage of sales. 7/
The royalty method was used for at least a part of the payment, 17 of
24 hatcheries and seven of nine large hatcheries used this method
exclusively. Payment averaged 3.45 cents per chick. One large hatchery


7/ See Table 34 for actual franchise costs per chick.




-30-


TABLE 25.--Franchises Held, Geographic Area Covered, Method of Payment
and Benefits by Size of Hatchery, 31 Hatcheries, Florida, 1959

Item : Size of Hatchery
: Small Medium ; Large

Number

Number of hatcheries holding franchise 10 6 8

Franchises:
Ames 1
Babcock 2 2 1
Cashman 1
Creighton 1
Darby 1
DeKalb 2 2
Dryden 1
Ghostly 1
Hanson 1
Hiesdorf-Nelson 1 1 1
Honeggar 2
Hy-Line 1
Kimber 1 2
Rapp 1
Total 11 7 8

Geographic areas allowed:
Unlimited 5 3 1
All of Florida plus neighboring
states 2
Part of Florida plus parts of
neighboring states 2 3
All of Florida 2 2
Part of Florida plus foreign 2
Part of Florida 1 1 1

Method of paying for franchise:a
Royalty 5 4 8
Cost of hatching eggs 2 1
Cost of male breeders 5 1
Cost of female breeders 2 1
Benefits from holding franchise:
Good breeding 8 4 7
Advertising 6 3 4

aSome hatcheries use more than one method of paying for
franchise.





-31-


which produced its own eggs paid 85 cents for breeding pullet chicks
plus 7 percent of franchise chick sales. Two medium and four small
hatcheries paid royalties of 14.5 and 12.5 cents per pullet, respect-
ively, but various discounts reduced the royalty to about 10 cents.
Two medium size hatcheries paid 60 cents each for pullets for their
breeding flock plus 10 percent of their franchise sales. One paid
$2.00 each for male and female breeding stock. Two small hatcheries
paid 60 cents peregg from which breeding stock was hatched and $1.10
for male breeding stock. Three paid approximately $1.00 each for male
and female breeding stock and one paid a straight 5 percent of sales.

Chick prices by months.--Normally the volume of sales of egg-type
chicks is subject to considerable variation. Hatcherymen attempted to
reduce variation in numbers by offering incentives in the form of lower
prices for those that made "off" season purchases. These are listed
prices and in most cases are subject to further discounts for such
reasons as early or large quality orders. Figure 5 shows by size
groups the average monthly quoted prices of egg-type chicks for
hatcheries in the three size groups. Each group was consistent with
a seasonal pattern of highest prices in January, February and March
and lowest prices in July and August. Variations in prices between
groups were due mainly to differences in breeding of chicks rather
than any superior marketing procedures. Two small and two medium
hatcheries handled incrossbred types which were the highest priced
chicks. A number of large hatcheries sold sex linked strains which
sold for the lowest price and thus lowered their average price. Prices
of egg-type chicks of a given franchise were not subject to much
variation from hatchery to hatchery.

Prices of broiler chicks normally follow a less definite pattern
of seasonal variation than egg-type chicks. Prices of straight-run
meat-type chicks in small hatcheries varied from 8.5 cents to 11.0 cents
during the year and in medium size hatcheries from 9.25 cents to 11.25
cents. The widest variations were in large hatcheries where prices varied
from a low of 5 cents to a high of 16 cents per chick. This wide varia-
tion was no doubt due partly to the chaotic conditions in the broiler
industry in 1959.

Rhode Island Reds and New Hampshire Reds are in a special class
which may be termed dual purpose. Prices of chicks of these breeds
ranged in between the two others. They were not produced in hatcheries
in the medium size group. Small hatcheries received 12 to 20 cents
each for straight-run dual purpose breeds during the year and large
hatcheries 10 to 20 cents.

Started-chick sales.--Raising started pullets for layer flock re-
placements is a relatively new development in the hatchery business.
This may be not only a source of revenue to the hatcheryman, but also
a business promoting service. Also, surplus chicks may be raised as
started pullets instead of being destroyed or, given away as extras.
Most hatcheries raised started pullets which were ordinarily sold at
around 12 weeks of age. During 1959, an average of 43,440 birds were
sold in nine small hatcheries, 49,760 in five medium and 59,750 in four
large hatcheries (Table 26).






-32-


TABLE 26.--Number of Hatcheries Selling Started Chicks and Average
Number Sold per Hatchery by Size of Hatchery, 31 Hatcheries,
Florida, 1959

Item : Size of Hatchery
: Small : Medium : Large

Number of hatcheries selling started chicks 9 5 4

Average number of birds sold per hatchery 43,440 49,760 59,750


General Policy and Management Practices
Relating to Sales

Delivery service.--Except for two hatcheries, delivery of chicks
to purchasers was offered by all firms (Table 27). This service was
available anywhere in the market area but ordinarily required a minimum
size order. If mail or some other form of shipment was cheaper, it was
normally used.

Chick losses and extras.--The most common method of handling claims
for chick losses was to work out a settlement that satisfied the cus-
tomer. This was the policy in 57 percent of the small hatcheries, 50
percent of the medium and 44 percent of the large. About one-third of
the hatcheries in each group followed the practice of replacing a part
of chick losses when such losses were considered traceable to hatchery
negligence. However, this was often a moot point and probably explains
why most hatcheries settled cases on an individual basis.

Hatcheries usually included a minimum number of chicks above the
number paid for as extras. At times of surplus chicks the number of
extras might be increased. For all hatcheries "extras" averaged
slightly less than 3 per 100 for meat-type and 4 per 100 for egg-type
chicks. Number of "extras" varied little between size groups.

Discounts.--Discounts from list prices were offered for quantity
purchases, calling for chicks at the hatchery and paying in advance.
No hatchery offered a quantity discount for meat-type chicks. Eight
of ten small hatcheries in which egg-type chicks were produced had
quantity discounts. On the average, a one cent reduction in price
was given with a purchase of 1,255 chicks during a year. A maximum
discount of 4 cents per chick was possible with additional purchases.
Six of seven medium hatcheries had quantity discounts that were nearly
identical with those of the small group. All large hatcheries had
quantity discounts. On the average, a purchase of 994 chicks were
required for the first reduction. The maximum discount was 3.7 cents
per chick.

A discount of 0.8 cents per chick was offered in three small
hatcheries if the chicks were picked up at the hatchery. Three large




-33-


TABLE 27.--Selected Policy and Management Practices Relating to Sales,
by Size of Hatchery, 31 Hatcheries, Florida, 1959

Item : Size of Hatchery
: Small : Medium : Large

Number

Delivery service of chicks:
Yes 13 7 9
No 1 1 --
Number delivered anywhere in market area 13a 7a 9
Policy in replacing chick losses: b
Replace 100 percent 5 3 4
Replace part 1 -- 11
Satisfy customer 8 4 4
Average number of extras per 100 chicks:
Meat-type 3.2 2.7 2.3
Egg-type 3.8 3.4 3.8
Discount policies:
For quantity purchases:
Egg-type chicks:
Number offering discounts 8 6 9
Number not offering discounts 2 2 0
Purchase required for 1 cent off
(chicks) 1255 1292 994
Maximum discount allowed (cents) 4.0 4.0 3.7
Meat-type chicks:
Number offering discount 0 0 0
For calling for chicks:
Number offering discounts 3 0 3
Number not offering discounts 10c 7d 6
Average discount per chick (cents) 0.8 -- 0.5
For early orders or orders paid in advance:
Number offering discounts 6c 4 4
Number not offering discounts 7 3 5
Average discount per chick (cents) 1.3 1.5 1.0


aOne-hundred percent of those hatcheries offering delivery
service.
b
One hatchery retained title to chicks so ordinarily made no
replacement.

cThirteen of 14 hatcheries in group reporting.

dSeven of 8 hatcheries reporting.






-34-


hatcheries offered a similar discount that averaged 0.5 cents per chick.
For advance payment, six small hatcheries, four medium and four large
offered discounts that averaged 1.3, 1.5 and 1.0 cent per chick,
respectively.

Advertising.--In addition to advertising sponsored by the franchisers,
all hatcheries in the large group, all but one in the medium, and nine
out of 14 hatcheries in the small group advertised by one means or another
(Table 28). Mail, newspapers and magazines were the media most commonly
used. Three-fourths of the outlay in small hatcheries went to magazines.
This was also the most popular media for medium hatcheries. The large
hatchery group allocated the largest part of their advertising outlay to
the mail form with magazines receiving the second largest share.


TABLE 28.--Forms of Advertising Used and Percent of Total Advertising Out-
lay Alloted to Each Form by Size of Hatchery, 31 Hatcheries, Florida, 1959

Form of Advertising Size of Hatchery
: Small Medium Large

Number Reporting

None 5 1
Mail 6 6 8
Newspaper .. 3 2
Magazine 7 6 7
Other .. 1 2
Percent of Advertising Outla

Mail 28 24 60
Newspaper .. 15 3
Magazine 72 55 29
Other .. 6 8
Total 100 100 100


CAPITAL INVESTMENT, RECEIPTS, EXPENSES AND
RETURNS FROM HATCHERY OPERATIONS

As indicated earlier, complete financial data were obtained for
20 hatcheries -- seven small, six medium and seven large. These data
are the basis of the material in this section. Averages are presented
for each of the size groups without regard to the type of chicks produced.
Data on the cost of producing egg- or meat-type chicks are presented in
the next section.


Amount and Distribution of Capital Investment

Capital investment was divided into five categories -- hatchery
equipment, buildings, trucks and autos, land and office equipment. The






-34-


hatcheries offered a similar discount that averaged 0.5 cents per chick.
For advance payment, six small hatcheries, four medium and four large
offered discounts that averaged 1.3, 1.5 and 1.0 cent per chick,
respectively.

Advertising.--In addition to advertising sponsored by the franchisers,
all hatcheries in the large group, all but one in the medium, and nine
out of 14 hatcheries in the small group advertised by one means or another
(Table 28). Mail, newspapers and magazines were the media most commonly
used. Three-fourths of the outlay in small hatcheries went to magazines.
This was also the most popular media for medium hatcheries. The large
hatchery group allocated the largest part of their advertising outlay to
the mail form with magazines receiving the second largest share.


TABLE 28.--Forms of Advertising Used and Percent of Total Advertising Out-
lay Alloted to Each Form by Size of Hatchery, 31 Hatcheries, Florida, 1959

Form of Advertising Size of Hatchery
: Small Medium Large

Number Reporting

None 5 1
Mail 6 6 8
Newspaper .. 3 2
Magazine 7 6 7
Other .. 1 2
Percent of Advertising Outla

Mail 28 24 60
Newspaper .. 15 3
Magazine 72 55 29
Other .. 6 8
Total 100 100 100


CAPITAL INVESTMENT, RECEIPTS, EXPENSES AND
RETURNS FROM HATCHERY OPERATIONS

As indicated earlier, complete financial data were obtained for
20 hatcheries -- seven small, six medium and seven large. These data
are the basis of the material in this section. Averages are presented
for each of the size groups without regard to the type of chicks produced.
Data on the cost of producing egg- or meat-type chicks are presented in
the next section.


Amount and Distribution of Capital Investment

Capital investment was divided into five categories -- hatchery
equipment, buildings, trucks and autos, land and office equipment. The





-35-


average investment for the 20 hatcheries was $28,473 (Table 29). Average
investment varied from $10,845 for small hatcheries to $55,596 for large
hatcheries. Over one-half of the total investment was in hatchery equip-
ment, most of which was incubators. Building represented 24 percent and
auto and trucks 16 percent. Land accounted for less than 5 percent of the
investment and office equipment only about 2 percent. The value used for
land was current market value as estimated by the hatchery operators. If
a sizeable acreage was owned, only one acre was charged to the hatchery
operations. Most small and medium size hatcheries had little or no
regular office staff and consequently very little office equipment.


TABLE 29.--Distribution of Capital Investment by Size of Hatchery, 20
Hatcheries, Florida, 1959

Item : Size of Hatchery : All
: Small Medium : Large : Hatcheries

Amount per Hatchery

Hatchery equipment $ 6,581 $ 9,577 $28,456 $15,136
Buildings 1,912 4,338 14,034 6,882
Trucks and autos 1,288 2,532 9,659 4,591
Land 986 750 2,075 1,296
Office equipment 78 200 1,372 568
Total $10,845 $17,397 $55,596 $28,473

Percent of Total

Hatchery equipment 60.7 55.0 51.2 53.2
Buildings 17.6 24.9 25.2 24.2
Trucks and autos 11.9 14.6 17.4 16.1
Land 9.1 4.3 3.7 4.5
Office equipment 0.7 1.2 2.5 2.0
Total 100.0 100.0 100.0 100.0

Amount per 1,000 Egg Capacity

Hatchery equipment $ 114 $ 70 $ 88 $ 86
Buildings 33 32 43 39
Trucks and autos 22 18 30 26
Land 17 5 6 7
Office equipment 1 1 4 3
Total $ 187 $ 126 $ 171 $ 161


Investment per 1,000 egg capacity averaged $161 but varied from a
low of $126 in medium hatcheries to a high of $187 in small hatcheries.
The investment in hatchery equipment per 1,000 eggs was much higher in
small hatcheries than in medium or large. This was also true of land.
Large hatcheries had a larger investment in buildings, trucks and autos
and office equipment than either small or medium size hatcheries.





-36-


Receipts

Receipts included the total income of the business from all sales
and services. Hatchery receipts came from three sources -- sale of chicks,
custom hatching and miscellaneous. Chicks raised by the hatchery and sold
as started pullets or broilers were included in receipts at their day-old
value. Receipts for the 20 hatcheries averaged $177,132 of which more
than 99 percent came from the sale of chicks (Table 30). Receipts varied
widely by hatchery groups averaging approximately $47,000 in small
hatcheries, $74,000 in medium and nearly $396,000 in large hatcheries.


TABLE 30.--Receipts per Hatchery by Size of Hatchery, 20 Hatcheries,
Florida, 1959

Item : Size of Hatchery : All
: Small : Medium : Large : Hatcheries

Amount per Hatchery

Sale of chicks $46,951 $72,740 $392,243 $175,540
Custom hatching 245 1,165 1,805 1,067
Other 0 0 1,501 525
Total $47,196 $73,905 $395,549 $177,132

Percent per Total

Sale of chicks 99.5 98.4 99.2 99.1
Custom hatching 0.5 1.6 0.4 0.6
Other 0.0 0.0 0.4 0.3
Total 100.0 100.0 100.0 100.0


Expenses

Expenses included all cash outlays charged to the business during
1959 plus non-cash items of depreciation, self labor, family labor, and
an interest charge on capital invested. Expenses were classified as
variable and fixed. In the case of capital items not used exclusively
for hatchery purposes, a portion of the yearly cost of each was charged
to hatchery operations based on estimates of managers.

Variable expenses.--Variable expense items were grouped as egg and
special chick expenses, labor expenses and other variable expenses.
Variable expenses averaged $154,557 for all hatcheries and accounted for
95 percent of the total expense (Table 31).

Egg and special chick expenses.--Hatching egg expenses included the
cash cost of eggs purchased plus the value of eggs produced by hatchery-





-36-


Receipts

Receipts included the total income of the business from all sales
and services. Hatchery receipts came from three sources -- sale of chicks,
custom hatching and miscellaneous. Chicks raised by the hatchery and sold
as started pullets or broilers were included in receipts at their day-old
value. Receipts for the 20 hatcheries averaged $177,132 of which more
than 99 percent came from the sale of chicks (Table 30). Receipts varied
widely by hatchery groups averaging approximately $47,000 in small
hatcheries, $74,000 in medium and nearly $396,000 in large hatcheries.


TABLE 30.--Receipts per Hatchery by Size of Hatchery, 20 Hatcheries,
Florida, 1959

Item : Size of Hatchery : All
: Small : Medium : Large : Hatcheries

Amount per Hatchery

Sale of chicks $46,951 $72,740 $392,243 $175,540
Custom hatching 245 1,165 1,805 1,067
Other 0 0 1,501 525
Total $47,196 $73,905 $395,549 $177,132

Percent per Total

Sale of chicks 99.5 98.4 99.2 99.1
Custom hatching 0.5 1.6 0.4 0.6
Other 0.0 0.0 0.4 0.3
Total 100.0 100.0 100.0 100.0


Expenses

Expenses included all cash outlays charged to the business during
1959 plus non-cash items of depreciation, self labor, family labor, and
an interest charge on capital invested. Expenses were classified as
variable and fixed. In the case of capital items not used exclusively
for hatchery purposes, a portion of the yearly cost of each was charged
to hatchery operations based on estimates of managers.

Variable expenses.--Variable expense items were grouped as egg and
special chick expenses, labor expenses and other variable expenses.
Variable expenses averaged $154,557 for all hatcheries and accounted for
95 percent of the total expense (Table 31).

Egg and special chick expenses.--Hatching egg expenses included the
cash cost of eggs purchased plus the value of eggs produced by hatchery-






-37-


owned flocks priced the same as those purchased. 8/ Royalty and sexing
expenses were the cash amounts paid for these services. Hatching eggs
averaged $93,617 for all hatcheries or 57.7 percent of total expenses.
Hatching eggs were 51 percent of total expenses in small hatcheries,
4 7 in medium and 60 percent in large hatcheries.

Special chick expenses included those items that pertained mainly to
egg-type chicks -- royalty payments and sexing charges. Royalty payments
- were 4.5 percent of total expense for all hatcheries, but 13 percent in
small hatcheries. This was because small hatcheries had a higher propor-
tion of egg-type chicks9/ and hatcheries which produced the most held
expensive franchises. The sexing charge was fairly standard in each
hatchery at two cents per chick. The percent sexing was of total
expense was largely a function of the type of chicks produced.

Labor expenses.--This classification included all payments to hatch-
ery employees. Expenses of employees that worked only part time in the
hatchery were allocated accordingly. Family labor and operator's labor
and management were charged at the amount the operator estimated it would
have cost to obtain an equivalent substitute. Other items associated
with the cost of labor such as commissions, travel and entertainment,
payroll taxes and various fringe benefits were also included.

Labor expenses averaged $26,682 per hatchery or 16.3 percent of
total expense. This proportion was about the same in small and large
hatcheries but averaged 21.5 percent of total expenses in medium hatch-
eries. No small hatcheries had a hired manager. Three of the six medium
and all but one of the large hatcheries had a hired manager. In some
cases these men devoted only a part of their time to hatchery operations.
The cost of a hired manager was $1,593 in medium hatcheries and $4,464
in large hatcheries. The value placed on the operator's labor and manage-
ment was $2,926 in small hatcheries, $4,223 in medium and $11,450 in large.
The item designated as hatchery labor, which included the direct hired
labor except sexing for operating the hatchery, averaged $8,376 for all
hatcheries.

Other variable production expenses.--Other variable production
expenses ranged from 9.0 percent for small hatcheries to 15.3 percent for
medium and averaged 13.9 percent of all hatcheries. The largest item in
this group was hatchery supplies which was 3.1 percent of total expenses
in the 20 hatcheries. Bad debts were $1,909 for all hatcheries. This
amount probably was higher than normal in 1959 because of a few rather
large losses in Cuban accounts.


8/ In two cases of a special nature in medium sized hatcheries,
the value of eggs produced by the hatchery-owned flock was charged at
the cost of keeping the breeding flock rather than pricing the eggs
the same as those purchased. Breeding flock expenses averaged $2,154
for the two flocks or $718 for the six medium hatcheries.

9/ See Table 8, page 18.





-38-


TABLE 31.--Expenses per Hatchery, by Size of Hatchery, 20 Hatcheries,
Florida, 1959

: Expenses per Hatchery
Item : Small : Medium : Large : All
: Hatcheries:Hatcheries:Hatcheries:Hatcheries


Variable Expenses:
Egg and Special Chick Expenses:
Hatching eggs $21,116
Royalty 5,432
Sexing 2,503
Total $29,051
Labor Expenses:
Hired manager $ --
Operator's labor and
management 2,926
Hatchery labor 2,112
Family labor 123
Sales salaries & commissions 867
Office salaries --
Travel, entertainment and
misc. selling expenses 386
Payroll tax & fringe benefits 84
Total $ 6,498


Other Variable Expenses:
Hatchery supplies
Office supplies
Freight and express
Vehicle expense
Electricity, fuel & water
Telephone and telegraph
Advertising
Accounting and legal
Bad debts
Repairs--bldgs. & equip.
Rent
Other
Total
Total Variable Expenses

Fixed Expenses:
Depreciation
Interest
Insurance
Taxes and licenses
Total Fixed Expenses


781
60
107
535
722
181
398
137
98
353
257
108
3,737
$39,286


1,207
651
94
177
$ 2,129


$36,083
3,689
3,616
$43,388


$215,434
12,296
7,301
$235,031


$ 93,617
7,312
4,517
$105,446


$ 1,593 $ 4,464 $ 2,040


4,223
4,621
767
1,716
1,129

2,164
204
$16,417

2,512
113
689
2,764
1,338
430
428
301
1,818
412
169
694
11,668
$71,473


3,142
1,044
461
203
$ 4,850


11,450
17,858
857
9,751
3,447

4,299
3,539
$ 55,665

11,519
1,113
7,610
8,628
4,966
2,487
3,341
720
3,797
1,287
678
4,194
50,340


6,298
8,376
573
4,231
1,545

2,290
1,329
$ 26,682

5,059
445
2,908
4,036
2,392
1,063
1,437
390
1,909
698
378
1,714
22,429


$341,036 $154,557


7,929
3,335
3,035
1,481
$ 15,780


4,140
1,709
1,233
641
$ 7,723


Total Expenses $41,415 $76,323 $356,816 $162. 280


Total Expenses


$41,415 $76,323 $356,816 $162.280






-39-


TABLE 31.--Continued.--Expenses per Hatchery, by Size of Hatchery, 20
Hatcheries, Florida, 1959

: Percent of Total Expenses
Item
Item: Small :Medium : Large : All
: Hatcheries:Hatcheries:Hatcheries:Hatcheries


Variable Expenses:
Egg and Special Chick Expenses:
Hatching eggs 51.0
Royalty 13.1
Sexing 6.1
Total 70.2


Labor Expenses:
Hired manager
Operator's labor and
management
Hatchery labor
Family labor
Sales salaries & commissi
Office salaries
Travel, entertainment and
misc. selling expenses
Payroll tax & fringe
benefits
Total

Other Variable Expenses:
Hatchery supplies
Office supplies
Freight and express
Vehicle expense
Electricity
Telephone and telegraph
Advertising
Accounting and legal
Bad debts
Repairs--bldgs. & equip.
Rent
Other
Total

Total Variable Expenses

Fixed Expenses:
Depreciation
Interest
Insurance
Taxes and licenses
Total Fixed Expenses


Total Expenses


ons


47.3
4.8
4.7
56.8


0.0

7.1
5.1
0.3
2.1
0.0


0.9

0.2
15.7


1.9
0.1
0.3
1.3
1.7
0.4
1.0
0.3
0.2
0.9
0.6
0.3
9.0

94.9


2.9
1.6
0.2
0.4
5.1


2.1

5.5
6.1
1.0
2.2
1.5


2.8

0.3
21.5


3.3
0.1
0.9
3.6
1.8
0.6
0.6
0.4
2.4
0.5
0.2
0.9
15.3

93.6


4.1
1.4
0.6
0.3
6.4


I0nn 0 1n n


60.4
3.5
2.0
65.9


1.3

3.2
5.0
0.2
2.7
1.0

1.2

1.0
15.6


3.2
0.3
2.1
2.4
1.4
0.7
0.9
0.2
1.1
0.4
0.2
1.2
14.1

95.6


2.2
0.9
0.9
0.4
4.4

inn A


57.7
4.5
2.8
65.0


1.3

3.9
5.2
0.3
2.6
0.9

1.3

0.8
16.3


3.1
0.3
1.8
2.5
1.5
0.7
0.9
0.2
1.2
0.4
0.2
1.1
13.9

95.2


2.5
1.1
0.8
0.4
4.8

I/ArA f%


. 100. 0i





-40-


Fixed expenses.--Fixed expenses included depreciation, insurance,
taxes and licenses, and interest on average investment in buildings,
equipment and land. Fixed expenses amounted to $7,723 for all hatcheries
or approximately 5 percent of total expenses. The charge for depreciation
made up about half of the fixed expenses. The charge for depreciation
was calculated by the straight line method based on the original cost
and estimated life of the depreciable items. The rate of depreciation
for similar items varied depending on the operator's estimate of years
of useful life. On the basis of original cost, the average rate of
depreciation for all hatcheries for groups of items was 3.88 percent
for buildings, 7.23 percent for hatchery equipment, 20.92 percent for
trucks and automobiles and 10.22 percent for office equipment.

Some hatcherymen were paying interest on loans obtained to buy
equipment, make improvements, etc. However, interest paid on borrowed
capital did not represent the total investment costs since borrowed
capital made up only a part of the capital to operate the business. The
amount of interest paid was omitted from expenses but an interest charge
was made at 6 percent of the average value of all capital items includ-
ing land for the year. The charge for interest was calculated at 6 per-
cent since this was the approximate rate on long-term mortgage loans.
The charge for interest accounted for about 20 percent of the fixed
expenses.

Total expenses averaged $41,415 in small hatcheries, $76,323 in
medium, and $356,816 in large and $162,280 for the 20 hatcheries. The
proportion that variable and fixed expenses made up of total expenses
varied very little between small, medium and large hatcheries.


Returns

Various measures of returns are shown in Table 32. Receipts are
the total of all receipts as shown in Table 30. Expenses are the amounts
shown in Table 31. Returns are presented in three ways -- net returns,
returns to the operator for labor and management and returns to the
operator for capital invested.

Net returns.--Net returns were the returns above all costs. This
item was calculated by subtracting total expenses from total receipts.
Net returns averaged $14,852 per hatchery but varied from $38,733 in
large hatcheries to a loss of $2,418 in medium hatcheries (Table 32).
As indicated earlier, included in expenses was an interest charge of
6 percent on capital invested, an allowance for depreciation, a charge
for family labor and a charge for the value of the operator's labor
and management. These expenses may or may not have involved cash out-
lays.

Returns to the operator for labor and management was the amount
available to the operator for his labor, supervision and conduct of the
hatchery enterprise after covering all expenses including a charge of






-41-


6 percent for the use of all capital owned by the operator used in the
hatchery business. This figure was obtained by adding the value placed
on operator's labor and management to net returns. The average returns
for operator's labor and management varied from $1,805 in medium hatch-
eries to $50,183 in large hatcheries.


TABLE 32.--Average Returns per Hatchery, by Size of Hatchery, 20
Hatcheries, Florida, 1959

Item : aSize of Hatchery : All
Item
: Small : edium Large : Hatcheries

Total receipts $47,196 $73,905 $395,549 $177,132
Total expenses 41,415 76,323 356,816 162,280

Net Returns $ 5,781 $-2,418 $ 38,733 $ 14,852

Returns to the Operator:
For labor and management 8,707 1,805 50,183 21,150
For average capital owned 6,432 -1,374 42,068 16,561


Returns on average investment was the amount available to the
operator for capital invested in the business after paying all expenses
including an allowance for his labor, supervision and management. This
was not an amount in addition to the return to the operator for his labor
and mnna_._ aent, but was a different way of allocating returns. Returns
on the average investment were computed by adding the charge for interest
to net returns. Returns on investment varied from $42,068 in large
hatcheries to a loss of $1,374 in medium hatcheries.

Hatchery returns by type of chicks produced.--Returns were also
calculated for hatcheries by types of chicks produced. The average net
returns for 10 hatcheries in which only egg-type chicks were produced
were $6,861 (Table 33). Net returns in the four hatcheries producing
meat-type chicks were $1,597 and $37,010 in the six hatcheries producing
both types of chicks. Returns to the operator for labor and management
varied from $4,670 for hatcheries producing meat-type chicks to $48,377
for hatcheries producing both types. Returns on the average investment
varied from $2,998 to $39,493 for these two groups respectively.


COST PER CHICK SOLD BY TYPES OF CHICKS

There was a wide difference in cost per chick sold in producing egg-
and meat-type chicks. Part of the difference was caused by the fact that
only about half of the chicks produced were sold since the chicks were
sexed and normally the cockerals were not sold. In the six hatcheries
where both egg- and meat-type chicks were produced, expenses such as
hatching eggs, royalties and sexing, clearly chargeable to a given type,





-42-


were allocated to that type. Joint expenses were divided between types
in the same ratio as the number of eggs of each type set during the year.
Expenses for each type in these hatcheries were then summarized with
hatcheries producing only that type. Averages were calculated based on
the number of chicks sold. It was not possible to separate data on chick
sales so as to get a figure on average price received for chicks sold.
Receipts were not kept separate by chick types in hatchery records. Be-
cause of discounts given, an average price could not be calculated from
posted prices.


TABLE 33.--Summary of Returns by Type of Chicks Produced, 20 Hatcheries,
Florida, 1959

Item Types of Chicks
Egg-Type : Meat-Type : Both Types

Number of hatcheries 10 4 6
Number of chicks sold 255,037 1,276,067 1,785,463

Total receipts $105,536 $129,579 $328,160
Total expenses 98,675 127,982 291,150
Net Returns $ 6,861 $ 1,597 $ 37,010

Returns to the Operator:
For labor and management 11,409 4,670 48,377
For average capital owned 8,227 2,998 39,493


Egg-Type Chicks

Egg-type chicks were sold in 16 of the 20 hatcheries for which com-
plete records were obtained. The data were analyzed to show the average
cost per chick sold for all hatcheries. The hatcheries were also divided
into two groups on the basis of low and high cost per chick sold.

The average cost per chick sold of producing an egg-type was 36.51
cents (Table 34). This figure was 31.49 cents in the half of the hatch-
eries with the lowest cost and 41.66 cents in the high cost group. In
each group variable expenses made up 94 percent or more of the total
costs. Cost of hatching eggs accounted for almost 50 percent of the
total cost, royalties 9 percent and sexing 6 percent. These three items
accounted for two-thirds of the cost in the low cost group and almost
three-fifths in the high cost group. The largest labor item was hatchery
labor followed by the value of operator's labor and management, except
in the low cost group where hatchery labor was slightly less than the
value placed on operator's labor and management.

The largest difference in cost in the low and high cost groups was
in labor expenses which was slightly less than 5 cents in the low cost
group and almost 9 in the high cost group. Hatchery labor accounted for
1 cent of the difference, payroll tax and fringe benefits .84 cent and
sales salaries and commissions .76 cent. Egg and special chick expenses






-43-


TABLE 34.--Cost per Egg-Type Chick Sold and Percent Various Items of
Total Costs, 16 Hatcheries, Florida, 1959

: Cost per Chick Sold : Percentage of Total
Item : All : Low : High: All I Low : High
:Hatcheries : Cost : Cost:Hatcheries: Cost : Cost
Cents Cents Cents Percent Percent Percent


Variable Costs:
Egg and Special Chick
Expenses:
Hatching eggs
Royalty
Sexing
Total


17.27
3.45
2.06
22.78


Labor Expenses:
Hatchery labor 1.89
Family labor .12
Hired manager .44
Operator's labor and
management 1.53
Sales salaries and
commissions 1.31
Office salaries .39
Travel, entertainment &
misc. selling expenses .74
Payroll tax and fringe
benefits .46
Total 6.88
Other Variable Expenses:
Hatchery supplies 1.02
Office supplies .09
Freight & express .63
Vehicle expense .83
Electricity, fuel and
water .48
Telephone & telegraph .28
Advertising .43
Accounting and legal .09
Bad debts .58
Repairs bldgs. & equip..17
Rent .10
Other .42
Total 5.12


Fixed Costs:
Depreciation
Interest on average
investment
Insurance
Taxes and licenses
Total


.98

.40
.21
.14
1.73


16.14
3.07
2.09
21.30


1.40
.02
.27


18.41
3.83
2.03
24.27


2.40
.22
.62


1.44 1.62

.93 1.69
.30 .49

.44 1.04

.06 .90
4.86 8.98


1.04
.07
.86
.45

.36
.20
.45
.08
.47
.13
.07
.06
4.24


1.00
.12
.40
1.22

.60
.35
.41
.10
.69
.21
.13
.78
6.01


.54 1.44


.25
.15
.15
1.09


.55
.27
.14
2.40


47.3
9.4
5.6
62.3


5.2
.3
1.2

4.2

3.5
1.1

2.0

1.2
18.7


2.8
.3
1.7
2.3

1.3
.8
1.2
.3
1.6
.5
.3
1.1
14.2


2.7

1.1
.6
.4
4.8


51.3
9.8
6.6
67.7


4.5
.1
.9

4.6

2.9
.9

1.4


44.2
9.2
4.9
58.3


5.8
.5
1.5

3.9

4.1
1.2

2.5


.2 2.1
15.5 21.6


3.3
.2
2.7
1.4

1.1
.6
1.4
.3
1.5
.4
.2
.2
13.3


1.7

.8
.5
.5
3.5


2.4
.3
1.0
2.9

1.4
.8
1.0
.2
1.7
.5
.3
1.9
14.4


3.5

1.3
.6
.3
5.7


36.51 31.49 41.66 100.0 100.0 100.0


Total Costs




-44-


were about 3 cents less in the low than in the high cost groups; other
variable costs differed by 1.77 cents and fixed costs by 1.31 cents.

Variation in cost by size of hatchery.--On the basis of hatchery
size, small hatcheries with a cost of 32.07 cents per chick had the
lowest cost and medium with a cost of 38.28 cents the highest (Table
35). In each size group variable expenses made up 94 percent or more of
the total costs. Hatching eggs and special chick expenses were 71 per-
cent of total costs in small hatcheries, but only 56 percent in medium
size hatcheries. In the small hatchery group the cost of hatching eggs
was almost two cents less than in the medium size group but the royalty
cost was 2.8 cents more. This difference represents the wide range in
cost of the various franchises. However, there was no apparent explanation
as to why most of the franchises held by small hatcheries were relatively
expensive and those held by medium hatcheries relatively inexpensive.

Labor expenses varied considerably between size of hatcheries. The
largest difference was in operator's labor and management which was 2.14
cents per chick sold in small size hatcheries, but only 1.00 cents in
large hatcheries. Large hatcheries tended to have a higher cost for
sales salaries and commissions and also for payroll taxes and fringe
benefits.

Other variable expenses were 2.99 cents per chick sold in small hatch-
eries, 5.77 cents in medium and 5.50 cents in large hatcheries. Supplies,
freight and express, vehicle expenses and bad debts were items of major
differences between the size groups.


Meat-Type Chicks

Meat-type chicks were produced in 10 of the 20 hatcheries supplying
complete records. The data were summarized to show average cost for all
hatcheries and also cost in low and high cost groups but not by size of
hatchery since there was only one hatchery in the medium group and three
in the small group that produced meat-type chicks.

The average cost per chick sold of producing a meat-type chick was
12.00 cents (Table 36). This cost was 10.99 cents in the low cost group
and 14.50 cents in the high cost group, or a difference of 3.51 cents.
For all hatcheries, cost of hatching eggs made up two-thirds of the total
costs, labor expenses and other variable expenses 14 percent each and fi:ed
expenses 5 percent.

In low and high cost hatcheries, there was a difference of 1.58 cents
in the cost of hatching eggs which accounted for nearly half of the diff-
erence of 3.51 cents in cost per chick sold in the two groups. Sales
salaries and commissions differed by .54 cent, bad debts by .32 cent and
hatchery supplies by .18 cent.





-45-


TABLE 35.--Cost per Egg-Type Chick Sold and Percent
Total Costs, by Size of Hatchery, 16 Hatcheries


Various Items of
,Florida, 1959


Item : Cost per Chick Sold : Percentage of Total
: Small: Medium: Large: Small: Medium: Large

Cents Cents Cents Percent Percent Percent


Variable Costs:
Egg and Special Chick
Expenses:
Hatching eggs
Royalty
Sexing
Total
Labor Expenses:
Hatchery labor
Family labor
Hired manager
Operator's labor and
management
Sales salaries and
commissions
Office salaries
Travel, entertainment &
misc. selling expenses
Payroll taxes and fringe
benefits
Total


Other Variable Expenses:
Hatchery supplies
Office supplies
Freight and express
Vehicle expense
Electricity, fuel and
water
Telephone and telegraph
Advertising
Accounting and legal
Bad debts
Repairs bldgs. & equip.
Rent
Other
Total


Fixed Costs:
Depreciation
Interest on average
investment
Insurance
Taxes and licenses
Total


15.55
4.88
2.22
22.65

1.53
.07
--


17.48
2.08
2.04
21.60


2.30
.43
.90


17.74
3.58
2.02
23.34


1.83
.39


48.5
15.2
6.9
70.6


4.8
.2


2.14 2.30 1.00 6.7


.78


.96 1.64 2.4
.39 .52


.35 1.16


.68 1.1


45.7
5.4
5.3
56.4

6.0
1.1
2.4

6.0

2.5
1.0

3.0


47.8
9.6
5.4
62.8


4.9
--m
1.1

2.7

4.4
1.4

1.8


.05 .11 .74 .2 .3 2.0
4.92 8.55 6.80 15.4 22.3 18.3


.67
.05
.04
.43

.54
.15
.35
.12
.08
.24
.23
.09
2.99


1.22
.06
.39
1.27

.53
.24
.24
.16
1.02
.15
.09
.40
5.77


1.04
.12
.93
.77

.43
.33
.54
.05
.54
.15
.06
.54
5.50


2.1
.2
.1
1.3

1.7
.5
1.1
.4
.2
.7
.7
.3
9.3


.85 1.54 .78 2.6


.43
.08
.15
1.51


.50
.22
.10
2.36


.34
.24
.15
1.51


1.3
.3
.5
4.7


3.2
.2
1.0
3.3

1.4
.6
.6
.4
2.7
.4
.3
1.0
15.1


4.0

1.3
.6
.3
6.2


2.8
.3
2.5
2.1

1.2
.9
1.5
.1
1.4
.4
.2
1.4
14.8


2.1

1.0
.6
.4
4.1


Total Costs 32 07 38.28 37A- 15 m0 n A inn n


Total Costs


32.07 88~28 17~~$ Innn


001 0 100 0





-46-


TABLE 36.--Cost per Meat-Type Chick Sold and Percent Various Items of
Total Costs, 10 Hatcheries, Florida, 1959

: Cost per Chick Sold Percentage of Total
Item : All : Low : High: All : Low : High
: Hatcheries : Cost : Cost:Hatcheries: Cost : Cost

Cents Cents Cents Percent Percent Percent


Variable Costs:
Egg and Special Chick
Expenses:
Hatching eggs
Royalty
Sexing
Total


Labor Expenses:
Hatchery labor
Family labor
Hired manager
Operator's labor and
management
Sales salaries and
commissions
Office salaries
Travel, entertainment &
misc. selling expenses
Payroll tax and fringe
benefits
Total


8.07

.02
8.09


.62
.05
.16

.43

.21
.10

.10

.05
1.72


Other Variable Expenses:
Hatchery supplies .41
Office supplies .03
Freight & express .22
Vehicle expense .32
Electricity, fuel &
water .19
Telephone & telegraph .07
Advertising .07
Accounting and legal .03
Bad debts .09
Repairs bldgs. & equip..05
Rent .02
Other .12
Total 1.62


Fixed Costs:
Depreciation
Interest on average
investment
Insurance
Taxes and licenses
Total
Total Costs


.29

.12
.11
.05
.57


7.62

.02
7.64


9.20

.01
9.21


.60 .66
.06 .01
.15 .16


.05 .59
.10 .11


.05 .03
1.49 2.23


.36
.04
.15
.32

.18
.07
.05
.03
a
.04
.02
.05
1.31


.27

.11
.13
.04
.55


12.00 10.99


.54
.01
.39
.33

.23
.06
.14
.02
.32
.07
.03
.30
2.44


.33

.14
.07
.08
.62


14.50


67.2

.2
67.4


5.1
.4
1.3

3.6

1.7
.9

.9

.3
14.2


3.4
.3
1.9
2.7

1.6
.6
.6
.2
.8
.4
.2
1.0
13.7


2.4

1.0
.9
.4
4.7


69.3

.2
69.5


5.5
.5
1.4

3.7

.4
.9


63.5
--
a
63.5


4.6
a
1.1

3.4

4.1
.8


.6 1.2

.5 ,2
13.5 15.4


3.3
.4
1.4
2.9

1.6
.6
.4
.3
a
.4
.2
.4
11.9


2.5

1.0
1.2
.4
5.1


3.7
a
2.7
2,.3

1.6
.4
1.0
.1
2.2
.5
.2
2.0
16.7


2.3

1.0
.5
.6
4.4


100.0 100.0 100.0


Less than .05 percent.


--





-47-


FACTORS AFFECTING COSTS AND RETURNS

The analysis in this section represents an attempt to evaluate the
effectiveness of resource use in Florida hatcheries, measured in terms of
returns to the operators for their labor and management and also costs
and returns per chick sold. Cross tabulations were used as the method
of studying relationships. Data for the 20 hatcheries for which complete
records were obtained were used. The factors studied were size of hatch-
ery, percent utilization of capacity, percent salable hatch, labor ex-
penses per $100 of receipts and investment per 1000 egg capacity. Be-
cause of the extreme heterogeneity of the 20 hatcheries studied, it was
difficult to isolate the effects of management policies and practices
on costs and net returns.

As indicated earlier, egg-type chicks were produced in 10 hatcheries,
meat-type in four and both types in varying proportions in six. Data for
each of these groups were summarized to study relationships by type of
chicks produced. To obtain more homogeneous groups, hatcheries producing
only egg- or meat-type chicks were sub-divided equally on the basis of
low and high costs per chick sold and also low and high selling price to
study factors associated with low or high costs or low or high selling
prices.


Factors Associated with Operator's Labor
and Management Returns

The 20 hatcheries had a wide range in returns to the operators
for their labor and management. The hatchery with the lowest return
sustained a loss for the year of $25,687 while the highest had a positive
return of $138,956. The hatcheries were grouped on the basis of low,
medium and high returns (Table 37). Six hatcheries that operated at a
loss constituted the low return group. Their average loss for the year
was $10,220. In the medium group the average operator's labor and manage-
ment return was $10,796 and $59,104 in the high return group.

The high return group averaged over 300,000 eggs capacity. This was
almost three times the average size of the other two groups. The high
return group operated at 74 percent of capacity compared to 28 percent
for the medium return group and 44 percent for the low group. The per-
cent salable hatch was about the same in each group. The high return
group was more specialized in meat-type chicks. They sold about 13 times
as many chicks as the medium return group and six times that of the low
return group.

The low return group sold more chicks than the medium group, but
mostly meat-type. Investment per 1000 egg capacity ranged from $123 in
the low return group to $175 in the high return group. Total expenses
per $100 receipts were highest in the low return group and least in the
high return group. Egg and special chick costs per $100 receipts were
nearly 50 percent more in the low return group than in the other two
groups.





-47-


FACTORS AFFECTING COSTS AND RETURNS

The analysis in this section represents an attempt to evaluate the
effectiveness of resource use in Florida hatcheries, measured in terms of
returns to the operators for their labor and management and also costs
and returns per chick sold. Cross tabulations were used as the method
of studying relationships. Data for the 20 hatcheries for which complete
records were obtained were used. The factors studied were size of hatch-
ery, percent utilization of capacity, percent salable hatch, labor ex-
penses per $100 of receipts and investment per 1000 egg capacity. Be-
cause of the extreme heterogeneity of the 20 hatcheries studied, it was
difficult to isolate the effects of management policies and practices
on costs and net returns.

As indicated earlier, egg-type chicks were produced in 10 hatcheries,
meat-type in four and both types in varying proportions in six. Data for
each of these groups were summarized to study relationships by type of
chicks produced. To obtain more homogeneous groups, hatcheries producing
only egg- or meat-type chicks were sub-divided equally on the basis of
low and high costs per chick sold and also low and high selling price to
study factors associated with low or high costs or low or high selling
prices.


Factors Associated with Operator's Labor
and Management Returns

The 20 hatcheries had a wide range in returns to the operators
for their labor and management. The hatchery with the lowest return
sustained a loss for the year of $25,687 while the highest had a positive
return of $138,956. The hatcheries were grouped on the basis of low,
medium and high returns (Table 37). Six hatcheries that operated at a
loss constituted the low return group. Their average loss for the year
was $10,220. In the medium group the average operator's labor and manage-
ment return was $10,796 and $59,104 in the high return group.

The high return group averaged over 300,000 eggs capacity. This was
almost three times the average size of the other two groups. The high
return group operated at 74 percent of capacity compared to 28 percent
for the medium return group and 44 percent for the low group. The per-
cent salable hatch was about the same in each group. The high return
group was more specialized in meat-type chicks. They sold about 13 times
as many chicks as the medium return group and six times that of the low
return group.

The low return group sold more chicks than the medium group, but
mostly meat-type. Investment per 1000 egg capacity ranged from $123 in
the low return group to $175 in the high return group. Total expenses
per $100 receipts were highest in the low return group and least in the
high return group. Egg and special chick costs per $100 receipts were
nearly 50 percent more in the low return group than in the other two
groups.





-48-


TABLE 37.--Factors Associated With Returns to the Operator for Labor and
Management
-- --------------


Factor


: Returns to the Operator or
: Labor and Management


: Low : Medium : High


1. Number of hatcheries
2. Egg capacity
3. Percent utilization of capacity
4. Percent salable latch
5. Number of chicks sold:
Egg-type
Meat-type
Total
6. Investment:
Total
Per 1000 egg capacity
7. Expenses per hatchery:
Variable:
Egg and special chick
Labor
Other variable
Fixed
Total
8. Expenses per $100 of receipts:
Variable:
Egg and special chick
Labor
Other variable
Fixed
Total
9. Returns to the operator for
labor and management:
Average per hatchery
Range:
Low
High


6
115,500
44
75

124,334
206,621
330,955

$ 14,247
123


$ 51,447
10,369
13,302
4,556
$ 79,674


$ 77
15
20
7
$ 119


$-10,22 0

-25,687
-903


7
101,083
28
76

157,934
7,359
165,293


7
300,611
74
75

341,635
1,833,313
2,174,948


$16,432 $ 52,708
162 175


$34,652
13,811
5,872
4,442
$58,777


$ 54
21
9
7
$ 91


$ 222,526
53,536
43,731
16 792
$ 336,585


$ 58
14
11
4
$ 87


$10,796 $ 59,104


1,484
21,133


25,655
138,956


Relation o: Selected Factors to Returns to the
Operator for Labor and Management

Size of hatchety.--The hatcheries were divided into three groups on
the basis of eggs c.pacity. Returns to the operator for labor and manage-
ment were highest in the large size group averaging $50,182 per hatchery
(Table 38). However, small hatcheries had an average return of $8,707
compared to $1,805 for the medium size groups.

Facilities were used to a greater extent in large hatcheries than
in the other two groups. Utilization of capacity was 71 percent and


-- ----





-49-


sales were more than 2k million chicks. The small hatcheries averaged
41 percent utilization of capacity and sold only about 160,000 chicks.
Medium hatcheries had a utilization of capacity of only about 27 percent.
Thc.y sold nearly 250,000 chicks per hatchery. Of the chicks sold, small
and medium hatcheries averaged approximately 70 percent egg-type, but
].rge hatcheries only 15 percent.


TABLE 38.--Relation of Size of Hatchery to Various Factors, 20 Hatcheries,
Florida, 1959

Factor Size of Hatchery
: Small : Medium :Large

1. Number of hatcheries 7 6 7
2. Egg capacity 57,766 137,370 325,183
3. Percent utilization of capacity 41 27 71
4. Percent salable hatch 79 76 75
5. Number of chicks sold:
Egg-type 111,229 177,146 343,073
Meat-type 48,243 68,596 1,910,737
Total 159,472 245,742 2,253,810
6. Investment:
Total $10,845 $17,397 $ 55,596
Per 1000 egg capacity 188 127 170
7. Expenses per hatchery:
Variable:
Egg and special chick $29,051 $43,388 $ 235,031
Labor 6,498 16,417 55,665
Other variable 3,737 11,668 50,340
Fixed 2_129 4 850 15,780
Total $41,415 $76,323 $ 356,816
8. Expenses per $100 of receipts:
Variable:
Egg and special chick $ 62 $ 59 $ 59
Labor 14 22 14
Other variable 8 16 13
Fixed 5 7 4
Total $ 89 $ 104 $ 90
9. Returns to the operator for
labor and management $ 8,707 $ 1,805 $ 50,182


Medium hatcheries had the lowest investment per 1000 egg capacity,
but they had the largest expense per $100 of receipts. Because of the
high proportion that variable expenses are of total expenses in a hatchery
operation, investment was not a significant factor in its effect on costs
and returns.

Percent utilization of capacity.--Percent utilization of capacity in
the 20 hatcheries ranged from a low of 9 percent to a high of 94 percent
(Table 39). The seven hatcheries having the highest utilization of capacity




-50-


averaged 74 percent and an operator's labor and management returns of
$59,104. They were the seven hatcheries that had the highest operator's
return as shown in Table 37. The low group averaged only 19 percent
utilization of capacity but returns to the operator were nearly $3,000.
The medium group averaged nearly 44 percent of capacity but showed a loss
for the year of $814.

Size of hatchery was closely related to percent utilization of capacity.
The low utilization group sold about an equal number of egg- and meat-type
chicks. The medium group sold nearly twice as many egg- as meat-type
chicks while the high group sold more than five meat-type for each egg-
type chick. The high utilization group had the lowest expenses per $100
of receipts but the medium group had the highest. Although, the extent to
which facilities were utilized had an effect on expenses, other factors
were more than offsetting.


TABLE 39.--Relation of Utilization of Plant Capacity to Various Factors,
20 Hatcheries, Florida, 1959

Factor Percent Utilization of Capacity
Factor
: Low : Medium : High

1. Number of hatcheries 7 6 7
2. Percent utilization of capacity:
Average 19 44 74
Range:
Low 9 34 62
Hi gh 29 52 94
3. Egg capacity 95,480 122,037 300,611
4. Percent salable hatch 75 76 75
5. Number of chicks sold:
Egg-type 67,633 229,685 341,635
Meat-type 68,228 135 607 1.833,313
Total 135,861 365,292 2,174,948
6. Expenses per hatchery:
Variable:
Egg and special chick $22,656 $65,441 $ 222,525
Labor 6,055 19,418 53,536
Other production 5,011 15,763 45,558
Fixed 2,991 4,793 14,967
Total $36,713 $105,415 $ 336,586
7. Expenses per $100 of receipts
Variable:
Egg and special chick $ 61 $ 66 $ 58
Labor 16 20 14
Other production 14 16 11
Fixed 8 5 4
Total $ 99 $ 107 $ 87
8. Returns to the operator for
labor and management $ 2,734 $ -814 $ 59,104





-51-


Percent salable hatch.--Percent salable hatch ranged from 67 to 87
percent in individual hatcheries (Table 40). One would expect this factor
to be related to returns but its importance was more than offset by other
factors. The group with the highest percent salable hatch had the lowest
returns to the operator, the lowest percent utilization of capacity, the
smallest eggs capacity, sold the least number of chicks and had the highest
cost per $100 of receipts. The low and medium groups were similar in egg
capacity and cost per $100 of receipts but the average return to the
operation was $3,000 more in the medium group.


TABLE 40.--Relation of Percent Salable Hatch to Various Factors, 20
Hatcheries, Florida, 1959

Factor : Percent Salable Hatch
S Low : Medium : High


1. Number of hatcheries
2. Percent salable hatch:
Average
Range:
Low
High
3. Egg capacity
4. Percent utilization of capacity
5. Number of chicks sold:
Egg-type
Meat-type
Total
6. Expenses per hatchery:
Variable:
Egg and special chick
Labor
Other variable
Fixed
Total
7. Expenses per $100 of receipts:
Variable:
Egg and special chick
Labor
Other variable
Fixed
Total
8. Returns to the operator for
labor and management


72

67
74
201,369
53

126,386
897,196
1,023,582


$102,641
21,929
22,185
8,627
155,382


$ 60
13
13
5
$ 91


77

75
79
197,910
64

238,002
978,693
1,216,695


$129,772
32,183
26,103
8,031
196,089


$ 60
15
12
4
$ 91


7

81

80
87
102,400
49

290,854
2,902
293,756


$70,452
24,536
16,888
5,965
117,841


$ 57
20
14
5
$ 96


$ 23,942 $ 27,042 $ 8.909


Labor expenses per $100 of receipts.--Labor expenses per $100 of
receipts ranged from a low of $2 to a high of $56 in individual hatcheries
and averaged $11 per hatchery in the low group, $17 in the medium and $26
in the high group (Table 41). Labor expenses per $100 of receipts was in-
versely related to operator's labor and management returns. The low labor





-52-


expense group had an average return of nearly $35,000 while the high group
averaged only $6,000. The low group had the largest average capacity,
the highest percent utilization of capacity, and sold the most chicks.
The low group ranked second in investment per 1000 egg capacity and third
in percent salable hatch.


TABLE 41.--Relation of Labor Expenses per $100 Receipts to Various Fac-
tors, 20 Hatcheries, Florida, 1959

Factor Labor Expense per $100 of Receipts
Low : Medium : High

1. Number of hatcheries 8 6 6
2. Labor expenses per $100 of receipts:
Average $11 $17 $26
Range:
Low 2 15 22
High 13 21 56
3. Egg capacity 258,595 129,333 110,017
4. Percent utilization of capacity 65 51 40
5. Percent salable hatch 74 75 80
6. Number of chicks sold:
Egg-type 182,001 217,648 246,848
Meat-type 1,528,077 305,632 11,004
Total 1,710,078 523,280 257,852
7. Investment:
Total $ 38,721 $18,359 $24,924
Per 1000 egg capacity 150 142 227
8. Returns to the operator for
labor and management $ 34,717 $19,064 $ 5,977


Investment per 1000 egg capacity.--On the basis of investment per
1000 egg capacity, the low group averaged $94, the medium group $140 and
the high group $262 (Table 42). The medium group had the highest average
operator's labor and management return which was more than $26,000. The
low investment group had a return of approximately $23,000 and the high
group a return of $15,000. Hatcheries in the medium investment group
averaged nearly twice as large as hatcheries in the other two groups.
The medium group also sold the most chicks per hatchery. Although in-
vestment per 1000 egg capacity had an effect on return, it was more than
offset by other factors.


Comparison of Returns in Hatcheries by
Types of Chicks Produced

The six hatcheries in which both types of chicks were produced had
the largest average operator's labor and management returns -- $48,000
as compared to $12,000 for hatcheries in which egg-type chicks were
produced and $5,000 for meat-type (Table 43). The hatcheries producing





-53-


egg-type chicks were the smallest with an average of less than 119,000
egg capacity. Hatcheries that produced meat-type chicks had a capacity
of 156,000 eggs and those that produced both types a capacity of nearly
283,000 eggs. The number of chicks sold varied even more between groups.
Egg-type hatcheries had an average utilization of capacity of only 38
percent, meat-type 70 and both types 66 percent. As indicated on page 54
only about half of the egg-type chicks produced were sold. Hatcheries
in which both types of chicks were produced had the lowest expenses per
$100 of receipts at $89 and the meat-type the highest at $99.


TABLE 42.--Relation of Investment per 1000 Egg Capacity to Various Fac-
tors, 20 Hatcheries, Florida, 1959

Factor Investment per 1000 Egg Capacity
: Low Medium High

1. Number of hatcheries 6 7 7
2. Investment per 1000 egg capacity:
Average $ 94 $ 140 $ 262
Range:
Low 82 114 207
High 106 157 417
3. Egg capacity 133,580 250,686 135,511
4. Percent utilization of capacity 64 64 64
5. Percent salable hatch 76 74 77
6. Number of chicks sold:
Egg-type 214,320 186,688 235,750
Meat-type 260,353 1,429,090 365,526
Total 474,673 1,615,778 601,276
7. Total receipts $128,964 $ 245,536 $150,016
8. Returns to the operator for
labor and management $ 22,838 $ 26,384 $ 15,180


Variation in returns for hatcheries with low and high expenses per
chick sold.--Hatcheries producing egg-type and meat-type chicks were sub-
grouped on the basis of low and high cost per chick sold (Table 44). Ave-
erage cost per egg-type chick sold was approximately 33 cents in the five
with the lowest cost and 45 cents in the five with the highest cost. On
the basis of eggs capacity, hatcheries with the lowest cost averaged about
two-thirds of the size of those with the highest cost. Percent utilization
of capacity was 46 percent in the low cost groups compared to 32 percent
in the high cost group. Percent salable hatch was the same in the two
groups but the low cost hatcheries sold almost 6000 more chicks.

In spite of factors apparently operating in the favor of hatcheries
with the lowest costs, operator's labor and management returns averaged
only $11,680 in this group compared to $12,127 in the high cost group.
Lower costs do not necessarily result in higher returns. Selling prices
as well costs were different for the two groups. In hatcheries with the




-54-


highest costs,chicks sold for an average of 47 cents compared to only 36
cents in the low cost group. The difference in selling price more than
offset the advantage of lower costs. In fact, in order to obtain the
higher prices, practices were used that resulted in increased costs.
Apparently these hatcheries operate under conditions of monopolistic
competition and therefore were able to sell their differentiated pro-
ducts for different prices.


TABLE 43.--Relation of Type of Chick Produced to Various Factors, 20
Hatcheries, Florida, 1959

: Type of Chick Produced
Factor : Egg-type : Meat-type : Both
: Only : Only : Types

1. Number of hatcheries 10 4 6
2. Egg capacity 118,570 155,575 282,810
3. Percent utilization of capacity 38 70 66
4. Percent salable hatch 79 77 73
5. Number of chicks sold:
Egg-type 255,037 0 282,103
Meat-type 0 1,276,067 1,503,361
Total 255,037 1,276,067 1,785,464
6. Expenses per hatchery:
Variable:
Egg and special chick $58,786 $ 96,682 $ 189,056
Labor 21,537 14,099 43,646
Other variable 12,728 11,939 45,586
Fixed 5,624 5,262 12,862
Total $98,675 $ 127,982 $ 291,150
7. Expenses per $100 of receipts:
Variable:
Egg and special chick $ 56 $ 75 $ 58
Labor 20 11 13
Other variable 12 9 14
Fixed 5 4 4
Total $ 93 $ 99 $ 89
8. Returns to the operator for
labor and management $11,904 $ 4.670 $ 48,377


The situation was somewhat different for hatcheries that produced
meat-type chicks only. The two low expense hatcheries had an average
expense per chick of less than 10 cents compared to 13 cents for the two
in the high expense group. The low expense hatcheries were nearly three
times as large, utilized their capacity nearly four times as much and had
a slight advantage in percent salable hatch. They sold more than 10
times as many chicks. The selling price was nearly the same for each
group. Returns to the operator were over $14,000 for the low expense
hatcheries and a loss of $4,684 for those with high expenses.





-55-


TABLE 44.--Selected Factors Associated with Low and High Cost per Chick
Sold, by Type of Chick Produced, 14 Hatcheries, Florida, 1959

: Cost per Chick Sold
Item : Egg-Type Only : Meat-Type Only
: Low :High : Low : High
: Cost : Cost : Cost : Cost

1. Number of hatcheries 5 5 2 2
2. Egg capacity 95,244 141,896 230,000 81,150
3. Percent utilization of capacity 46 32 87 24
4. Percent salable hatch 79 79 77 73
5. Number of chicks sold 257,987 252,087 2,339,091 213,042
6. Expenses:
Per chick: Cents Cents Cents Cents
Variable:
Egg and special chick 21.33 24.81 7.58 7.50
Labor 5.53 11.43 1.02 2.00
Other variable 4.42 5.57 .83 2.14
Fixed 1.49 2.94 .35 1.08
Total 32.77 44.75 9.78 12.72
Percent of total:
Variable:
Egg and special chick 65.1 55.4 77.5 59.0
Labor 16.9 25.5 10.5 15.7
Other 13.5 12.5 8.4 16.8
Fixed 4.5 6.6 3.6 8.5
Total 100.0 100.0 100.0 100.0
7. Selling price per chick sold(cents)35.89 47.00 10.16 10.08
8. Returns to the operator for
labor and management $11,680 $12,127 $ 14,024 $-4,684


Variation in returns for hatcheries with low and high selling price
per chick sold.--The importance of selling price was indicated in the
preceding section. Hatcheries were grouped on low and high selling price
to study factors associated with selling price (Table 45). For hatcheries
producing egg-type chicks only, the five having the highest selling price
averaged over 47 cents per chick, but the low five averaged only 35 cents.
Returns to the operator averaged $15,000 for the five with high prices
and nearly $9,000 for the low price group. The high price group had an
egg capacity of 135,000 and the low price group 102,000. There was little
difference between the two groups in number of chicks sold. The high
price group had a small advantage in percent salable hatch but utilization
of capacity was higher in the low price group. Average expenses were
43.83 cents per chick in the high price group but only 33.29 cents in
the low price group. However, difference in selling price more than made
up for the difference in expenses. The high price group had an average
return to the operator of 5.78 cents per chick sold as compared to 3.49
cents for the low price group.





-56-


TABLE 45.--Selected Factors Associated with Low and High Price Per Chick
Sold, by Type of Chick Produced, 14 Hatcheries, Florida, 1959

: Price per Chick Sold
Item : Egg-Type Only : Meat-Type Only
: Low : High : Low : High
: Price : Price : Price Price

1. Number of hatcheries 5 5 2 2
2. Egg capacity 101,844 135,296 104,500 206,650
3. Percent utilization of capacity 42 34 30 90
4. Percent salable hatch 78 80 73 78
5. Number of chicks sold 248,697 261,377 341,625 2,210,509
6. Receipts:
Per hatchery $87,049 $124,024 $33,413 $225,746
Per chick sold 35.00c 47.45C 9.78o 10.21C
7. Expenses:
Per hatchery $82,785 $114,566 $39,455 $216,509
Per chick sold 33.29o 43.83C 11.55C 9.79c
8. Returns to the operator for
labor and management:
Per hatchery $ 8,689 $ 15,118 $-5,185 $ 14,524
Per chick sold 3.49c 5.780 -1.52C .66c


Hatcheries that sold only meat-type chicks, had about the same sell-
ing price per chick. The two hatcheries with the highest selling price
averaged 10.21 cents per chick and the two with the lowest price 9.78
cents. The two hatcheries with the highest selling price had twice the
egg capacity of the low price group, utilized their capacity nearly three
times as much and had a higher percent salable hatch. Consequently, they
sold nearly seven times as many chicks.

Cost per chick sold averaged 9.79 cents in the high selling price
group and 11.55 cents in the low selling price group. Returns to the
operator were $14,524 in the high price group but there was a negative
return of $5,185 in the low price group. On a per-chick sold basis,
returns to the operator were .66 cent in the high price group and a loss
of 1.52 cents in the low price group. Apparently with meat-type chicks,
differentiation of product is less than with egg-type chicks. Con-
sequently, there was less opportunity for a selling price differential.
Hence, expenses became more important than selling price as a determinant
of profit.





-57-


SUMMARY


There were 88 hatcheries in Florida in 1938 with an incubator
capacity of 1,698,000 eggs. By 1948 the number had increased to 135
and total egg capacity to 4,300,000. The number of hatcheries declined
af.:er 1948 and only 37 were in operation in 1959. However, capacity
continued to increase and was reported at 5,314,000 eggs. This was an
average capacity of 143,622 eggs compared to only 19,295 eggs for the
hatcheries operating in 1938.

A decrease in the price of chicks sold, especially meat-type chicks,
resulted in a decline in income of hatcheries in 1959. Average receipts
per hatchery were down nearly 40 percent below 1958, although the number
of chicks sold was up 17 percent. The resulting decrease in net income
was of real concern to leaders in the industry. They requested a study
of the hatchery industry in the state to provide information that might
aid management in better adjusting to the changing economic situation.
This study was made with specific objectives to (1) describe hatcheries
in Florida as to management practices and significant trends, (2) present
data on the organization of resources, (3) present empirical results of
resource organization in terms of costs and returns, and (4) evaluate
practices and factors affecting costs and returns.

At the time of the study there were 33 commercial hatcheries in
Florida that varied in size from 13,300 to 507,000 egg capacity. Hatch-
eries were classified into three size groups -- small, less than 100,000
egg capacity; medium, 100,000 to 199,999; and large 200,000 egg capacity
or more. There were 14 'small hatcheries, 9 medium and 10 large.

Because of the small number and the wide range in size and location
of hatcheries, the entire population was included in the study. Data were
obtained during late 1960 and early 1961 by personal interviews with
hatchery owners or managers. The questionnaire was divided into two
parts. The first part dealt with management practices which were expected
to affect profits. The second part was designed to obtain financial
data on business operations. Data were obtained for 31 of the 33 hatcheries
on management practices. Financial data were obtained for 20 hatcheries.
In most cases, the data were for the 1959 calander year. If the records
were for a fiscal year, the most recent year was used.


General Characteristics and Practices

About one-half of the hatcheries studied produced egg-type chicks,
one-fifth meat-type and 29 percent both types. Capacity of the 20 hatch-
eries for which complete data were obtained varied from an average of
58,000 eggs in small hatcheries to 325,000 in the large group. For the
year studied, capacity was used to the extent of 41 percent in small
hatcheries, 27 percent in medium and 71 percent in large. The number of
chicks sold per hatchery averaged 918,371. About three-fourths were meat-





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SUMMARY


There were 88 hatcheries in Florida in 1938 with an incubator
capacity of 1,698,000 eggs. By 1948 the number had increased to 135
and total egg capacity to 4,300,000. The number of hatcheries declined
af.:er 1948 and only 37 were in operation in 1959. However, capacity
continued to increase and was reported at 5,314,000 eggs. This was an
average capacity of 143,622 eggs compared to only 19,295 eggs for the
hatcheries operating in 1938.

A decrease in the price of chicks sold, especially meat-type chicks,
resulted in a decline in income of hatcheries in 1959. Average receipts
per hatchery were down nearly 40 percent below 1958, although the number
of chicks sold was up 17 percent. The resulting decrease in net income
was of real concern to leaders in the industry. They requested a study
of the hatchery industry in the state to provide information that might
aid management in better adjusting to the changing economic situation.
This study was made with specific objectives to (1) describe hatcheries
in Florida as to management practices and significant trends, (2) present
data on the organization of resources, (3) present empirical results of
resource organization in terms of costs and returns, and (4) evaluate
practices and factors affecting costs and returns.

At the time of the study there were 33 commercial hatcheries in
Florida that varied in size from 13,300 to 507,000 egg capacity. Hatch-
eries were classified into three size groups -- small, less than 100,000
egg capacity; medium, 100,000 to 199,999; and large 200,000 egg capacity
or more. There were 14 'small hatcheries, 9 medium and 10 large.

Because of the small number and the wide range in size and location
of hatcheries, the entire population was included in the study. Data were
obtained during late 1960 and early 1961 by personal interviews with
hatchery owners or managers. The questionnaire was divided into two
parts. The first part dealt with management practices which were expected
to affect profits. The second part was designed to obtain financial
data on business operations. Data were obtained for 31 of the 33 hatcheries
on management practices. Financial data were obtained for 20 hatcheries.
In most cases, the data were for the 1959 calander year. If the records
were for a fiscal year, the most recent year was used.


General Characteristics and Practices

About one-half of the hatcheries studied produced egg-type chicks,
one-fifth meat-type and 29 percent both types. Capacity of the 20 hatch-
eries for which complete data were obtained varied from an average of
58,000 eggs in small hatcheries to 325,000 in the large group. For the
year studied, capacity was used to the extent of 41 percent in small
hatcheries, 27 percent in medium and 71 percent in large. The number of
chicks sold per hatchery averaged 918,371. About three-fourths were meat-





-58-


type and one-fourth egg-type but the percentage varied from about 70
percent egg-type in small and medium hatcheries to only 15 percent egg-
type in large hatcheries.

Nearly one-half of all eggs for producing egg-type chicks came from
hatchery-owned flocks. Contract flocks and dealers were important sources
mainly in large hatcheries. Most of the eggs for producing meat-type
chicks came from contract flocks. Five hatcheries had contracts with 89
producers for the purchase of hatching eggs. About three-fourths of the
eggs for egg-type chicks and 36 percent for meat-type were produced in
Florida.

Approximately 70 percent of the egg-type chicks were sold in Florida.
Slightly less than half of the meat-type chicks were sold in Florida and
23 percent outside of the United States. Egg-type chicks were sold
mainly to independent farmers and wholesalers. Eighty-eight percent of
the meat-type chicks were sold to wholesalers. Wholesalers were given
a discount on the chicks they bought which was approximately their pro-
fits. Discounts averaged 3 cents per chick in large hatcheries and 2.4
cents in small.

A franchise was held in 24 of the 25 hatcheries that produced egg-
type chicks. Two hatcheries held two franchises. A franchise gives a
he.tcheryman the right to obtain and sell a patented strain of chicks
which has been developed by a specialized breeder. The most common way
of paying for a franchise was by means of a royalty.

Eighteen hatcheries which handled started pullets sold an average
of about 50,000 birds. This activity served not only as a source of
revenue but as a service to customers and a profitable means of handling
surplus chicks.


Capital Investment, Receipts, Expenses and Returns

The average investment of the 20 hatcheries for which financial
data were obtained was $28,473 but varied from an average of $10,845
in small hatcheries to $55,596 in large. Investment per 1000 egg
capacity was $187 in small hatcheries, $126 in medium and $171 in large.
Fcr the average hatchery, 53 percent of the investment was in hatching
equipment, 24 percent in buildings, 16 percent in trucks and autos,
5 percent in land and 2 percent in office equipment.

Sources of hatchery receipts were sale of chicks, custom hatching
and miscellaneous. For the year studied, gross receipts were approximately
$47,000 in small hatcheries, $74,000 in medium and $396,000 in large.
More than 98 percent of receipts in each size of hatchery came from the
sale of chicks.

Expenses included all cash and non-cash items charged to the
business during the year including an interest charge on average capital
invested. Total expenses averaged $162,280 in the 20 hatcheries.
Variable expenses made up 95 percent of total expenses and fixed expenses





-59-


only 5 percent. Hatching eggs was the major item and accounted for 58 per-
cent of total expenses. Charges for labor accounted for 16 percent and
other production expenses 14.

The average return to the operator for labor and management was
$21,150. This figure in individual hatcheries varied from a loss of
$25,687 to a positive return of $138,956. Operator's labor and manage-
ment returns averaged $11,409 in the 10 hatcheries in which only egg-type
chicks were sold, $4,670 in four hatcheries selling only meat-type chicks
and $48,377 in six hatcheries that sold both types.

It cost 36.51 cents per chick sold to produce an egg-type chick and
12.00 cents to produce a meat-type. Hatcheries producing egg-type chicks
normally sell sexed chicks so only about half of the chicks hatched were
sold. This was the main factor in the wide difference in cost for the
two types. Cost of hatching eggs was 47 percent of total expenses for
egg-type chicks compared to 67 percent for meat-type. Labor was 19 per-
cent of total expenses for egg-type chicks and 14 percent for meat-type.
Other production expenses and fixed expenses were approximately the same
proportion of total expenses in the two groups.


Factors Affecting Costs and Returns

Because of the heterogeneity of the output of the 20 hatcheries, it
was difficult to isolate the effects of management policies and practices
on costs and returns. The seven hatcheries with the highest operators'
labor and management returns had an egg capacity about three times the
low or medium return group. They operated at an average capacity of 74
percent compared to 44 percent for the low and 28 percent for the medium
return groups. These hatcheries sold about 6 times as many chicks as the
low return and 14 times as many as the medium return group. They were more
specialized in the production of meat-type chicks. The high return group
had expenses of $87 per $100 of receipts compared to $119 for the low
group and $91 for the medium group.

In hatcheries that produced only egg-type chicks, cost per chick
sold was approximately 33 cents in the five with the lowest cost per chick
and 45 cents in the five with the highest cost. Prices received for chicks
sold averaged 47 cents in the hatcheries with the highest costs and 36
cents in those with the lowest costs. The operator's labor and manage-
ment return was $12,127 in the high cost group compared to $11,680 in the
low cost group as the more favorable selling price more than offset the
high cost per chick.

In hatcheries producing only meat-type chicks, the two low cost
hatcheries had an average expense of less than 10 cents per chick compared
with 13 cents for the two with the highest costs. The low cost hatcheries
were nearly three times as large, used their capacity nearly four times
as much and sold more than 11 times as many chicks. Selling price was
nearly the same in the two groups. Returns to the operator for labor and





-60-


management was over $14,000 for the low cost hatcheries but the high cost
group had a negative return of $4,684.

This analysis would indicate that the factors most closely associated
with high labor and management returns were a large size plant, a high
utilization of capacity and sales of a large number of chicks of both
egg- and meat-types. High utilization of capacity was accomplished by
specialization in the production of meat-type chicks which have a relatively
constant demand throughout the year. Because fixed expenses were such a
small part of total expenses, the effects of a high utilization of capacity
was primarily through additional returns from sales of more chicks rather
than reduced expenses per chick.

Egg-type chicks appeared to be a highly differentiated product. The
added expenses of producing a chick that would sell for a high price tended
to be more than offset by the higher price received for the chick. Price
differentials were small for meat-type chicks. Low expenses per chick
sold were the key to profitableness for this type. The areas of greatest
variation in expenses between low and high cost meat-type hatcheries were
other production expenses and payments for labor.


ACKNOWLEDGMENTS


Much of the data in this manuscript was originally in a disserta-
tion presented by Victor Edman to the Graduate Council of the University
of Florida in partial fulfillment of the requirements for the degree of
doctor of philosophy. The authors wish to express their appreciation to
hatchery owners and managers who supplied the information without whose
cooperation this study would have been impossible.






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APPENDIX

STATISTICAL TABLES


TABLE 46.--Commercial Broiler Production in
1940-1962


the United States and Florida,


Year : United States : Florida
: Numbers :Pounds : Numbers : Pounds


Thousands
142,762
191,502
228,187
285,293
274,149

365,572
292,527
310,168
370,515
513,296


1940
1941
1942
1943
1944

1945
1946
1947
1948
1949

1950
1951
1952
1953
1954

1955
1956
1957
1958
1959

1960
1961
1962


413,474
558,905
674,087
823,837
817,605

1,107,174
883,855
936,442
1,126,643
1,570,197

1,944,524
2,414,767
2,623,934
2,904,174
3,236,248

3,349,555
4,269,502
4,682,738
5,430,674
5,762,951

6,017,332
6,841,258
6,918,633


Thousands
3,000
3,800
4,900
6,000
5,000

5,750
5,462
6,773
7,247
8,334


9,001
8,911
9,980
10,479
11,736

9,389
11,830
10,884
11,319
10,413

10,101
12,222
11,855


Source: Selected Reports,
Department of Agriculture.


Statistical Reporting Service, U. S.


631,458
788,601
860,891
946,533
1,047,798

1,091,684
1,343,560
1,447,528
1,659,519
1,736,922

1,794,966
1,993,446
2,026.348


8,400
10,640
12,250
15,000
12,500

14,375
14,747
18,287
18,118
23,335

26,103
25,842
27,944
30,389
34,034

27,228
35,490
33,740
35,089
33,322

32,323
39,110
37.936


I


,






-62-


TABLE 47.--Average Number of Hens and Pullets During the Year and Total Pro-
duction of Eggs and Production per Layer in the United States
and Florida and the per Capita Consumption of Eggs in the
United States, 1940-1962

United States Florida United States
: Avg. Number : Avg. Number : per Capita Egg
: of Hens and Production of : of Hens and Production of: Consumption
Year: Pullets During Eggs : Pullets During Eggs
Year Total Per : Year Total Per
: Layer Laye :

Thousands Millions Number Thousands Millions Number Number

1940 296,594 39,707 134 1,601 205 128 319
1941 300,864 41,894 139 1,578 198 125 311
1942 341,641 48,610 142 1,709 222 130 318
1943 382,987 54,547 142 1,942 251 129 347
1944 395,796 58,537 148 2,009 260 129 354

1945 369,430 56,221 152 1,839 247 134 402
1946 357,592 55,962 156 1,859 251 135 379
1947 345,117 55,384 160 1,941 262 135 383
1948 331,589 54,899 166 2,120 299 141 389
1949 330,699 56,154 170 2,160 324 150 383

1950 339,540 58,954 174 2,189 364 166 389
1951 327,831 58,063 177 2,163 372 172 392
1952 320,491 58,068 181 2,269 395 174 390
1953 312,086 57,891 185 2,416 443 183 379
1954 314,153 58,933 188 2,479 501 202 376

1955 309,297 59,526 192 2,793 568 203 371
1956 310,672 61,113 197 3,410 709 208 369
1957 306,676 61,026 199 3,835 793 207 362
1958 304,441 61,607 202 4,212 881 209 354
1959 305,720 63,335 207 4,484 968 216 352

1960 294,662 61,491 209 4,720 1,030 218 334
1961 294,990 62,080. 210 5,144 1,144 222 325
1962 297,800 63,151 212 5,617 1,225 218 323


Source: Selected Reports, Statistical Reporting
Department of Agriculture.


Service, U. S.






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TABLE 48.--Average Price Paid to Commercial Hatcheries in Florida for
Baby Chicks by Months and Types, 1959

Mot: Type of Chick
: Broiler Breeds :Egg Breeds
: (straight-run) : Pure Breeds : In Cross
J: (pulletc) : (pullets)

January 11.0 43.5 57.0
February 10.0 43.5 57.0
March 10.0 44.5 57.0
April 9.5 43.0 54.0

May 9.0 43.5 52.0
June 10.0 43.0 52.0
July 10.0 41.0 51.0
August 10.0 41.0 51.0

September 9.5 40.0 51.0
October 10.5 43.0 55.0
November 10.5 43.0 55.0
December 10.5 43.5 54.0


Source: U. S. Department of Agriculture, Agriculturl Prices
(Washington, D. C.: U. S. Government Printing Office, 1959).





-64-


TABLE 49.--Average Monthly List Prices of Day Old Egg-type
Size of Hatchery, 25 Hatcheries, Florida, 1959


Pullets by


:Monh Size Group
Month: Small : Mediumb Largec
Cents

January 45.9 48.3 43.4
February 45.9 48.3 43.7
March 45.9 48.3 43.7
April 45.3 47.9 43.3

May 44.9 47.3 42.5
June 44.1 46.9 41.7
July 43.5 46.6 40.7
August 43.5 46.6 40.5

September 44.1 46.9 41.2
October 44.4 47.0 41.5
November 44.6 47.0 41.9
December 45.1 47.4 42.4


a10 of 14 hatcheries reporting one breed each.

6 of 8 hatcheries reporting 7 breeds.
c
9 of 9 hatcheries reporting 11 breeds.

TABLE 50.--Percent Utilization of Capacity by Months and by Size Groups,
Florida, 1959

: ,Size Group
Month : : All
: Small : Medium : Large
Percent
January 35.2 38.5 64.4 54.0
February 54.3 46.6 70.4 62.1
March 40.4 42.7 74.7 62.1
April 45.0 41.2 72.6 60.9

May 29.8 20.5 67.9 50.7
June 29.1 23.0 72.2 53.9
July 45.0 17.0 61.5 47.6
August 33.2 17.3 61.7 46.4

September 25.7 19.9 59.2 44.7
October 35.3 15,7 70.5 51.6
November 26.6 20.2 59.5 45.1
December 22.5 23.6 58.8 45.1




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