Almost all broiler chickens (99.5 percent in terms of the value of production in 2020) are raised under a production contract in which a farmer is paid a fee to raise animals owned by the contractor. In the broiler industry, growers are paid relative to other growers in what is often called a “tournament” pay system.
Under tournament systems, broiler companies who manage each stage of the supply chain (also known as “integrators”) contract with farmers who grow birds to be delivered to a processing plant. Integrators provide chicks to multiple growers at the same time, for delivery to a processor in the same week. The growers provide housing, equipment, utilities, and labor. Integrators provide chicks, feed, transportation, veterinary services, and technical guidance.
Once a flock of broilers is ready for processing, the integrator weighs the flock and tallies the cost of the inputs to determine the flock’s performance compared to other growers in the same tournament. Growers whose costs are lower than the average for all growers receive a premium over the contract’s base fee; those whose costs exceed the average for all growers receive a deduction from the base.
The amount of the premium or deduction reflects the size of the cost difference. In 2020, the median payment to growers was 6.79 cents per live-weight pound delivered. But actual fees varied widely, from 4.29 cents paid to the bottom 10 percent of growers to 9.64 paid to growers to the top 10 percent.
