Comprehensive Poultry Supply Chain Model with Vertical and Horizontal Linkages: Implication of Domestic and International Shocks

According to USDA FAS, in 2017, the US was the largest broiler-producing country with 18.696 million metric tons and the second largest exporter of broiler products with 3.075 million metric tons (Brazil is the largest exporter with 3.847 million metric tons). Thus, around 83% of US production is consumed domestically. According to USITC, chickens are the most important protein source in the US, and Americans consume more chicken per capita than any other country. However, while the broiler industry is a key segment of US agriculture, it is underserved by large-scale supply-chain and trade models. In this study, to fill this gap in the literature, we build a comprehensive supply-chain model of the US broiler industry that accounts for corn and soybean, feed mills, breeders, hatcheries, grow-out farms, broiler processing, further processing, and international trade. This broiler supply-chain model is calibrated to US data averaged over 2012 - 2017 to analyze two scenarios: a) impacts of a shock to the corn and soybean prices due to tariffs imposed by China on US corn and soybeans and b) effects of the productivity increase in grow-out segments on entire the US broiler supply chain. The results of the first and second alternate scenarios are compared to the baseline scenario to quantify the impact of the reduction corn and soybean prices and productivity shock to grow-out farmers. The numerical analysis from first scenario shows that as the price of corn and soybean in the US market fall by 18% and 24%, respectively, feed supply increase and feed prices decreases, which directly lower the production costs of breeders and grow-out farms. Thus, while the Chinese tariff on corn and soybean undoubtedly make corn and soybean producers worst off, the chicken industry benefits from lower costs. Also, the numerical analysis from second scenario shows that boosting productivity by 10% in the grow-out segment led to only an increase an increase broiler chicken production but also a reduction in input demand. Thus, this analysis highlights the trade off advances in research and development in chicken breads as producer upstream from grow-out farm are worse off as demand for their products falls, but grow-out farms, downstream producers, and consumer benefit