Chicken Traders Serve Niche in Industry

For an industry unsure of what to call itself, the business of brokering, trading, exporting and importing chicken sure has become a popular field for many Northwest Arkansas residents to pursue.

The numerous poultry firms in the area have spawned dozens of companies moving everything from chicken paws to China and breast meat to Baltimore. But before any aspiring entrepreneur decides to jump into the field, one local poultry official believes it would be beneficial to have a plan “B.” Bill McClellan, vice president sales and marketing at George’s Inc. in Springdale, was once part-owner of a trading company in Raleigh, N.C. He said it was tough then and believes it must be much tougher now.

Just how do so many keep their companies afloat financially?

“I’ve often wondered the same thing,” McClellan said. “I know a lot that have gotten out of it. For a person to break in the mix it’s virtually impossible anymore. They’re really dealing with a difficult business to make a living at. I wouldn’t want to try to do it.

“People that have been in the business for a lot of years have several people they source from, several that have spot needs. So they’ve got a good customer base and a good supplier base so they can run around and make a decent business.”

The common name for these businesses are brokerages, but McClellan said that is often a misconception about the actual profession.

A broker gets commission in setting up a sale from a poultry firm to a client, such as a retail store, school system or prison. The actual selling company — such as a George’s, Tyson Foods or Simmons Foods — handles all of the paperwork and money in the transaction.

A trader physically pays the selling company and gets the title to the meat, then handles the shipping to the buyer.

While the poultry firms utilize the traders and brokers, competition is kept very low-key and unadvertised. The traders/brokers who talked to the Northwest Arkansas Business Journal requested anonymity. They said large firms frown on public statements made by brokers/traders about the money made from selling what was once their own products.

“We provide a very viable service,” said one local trader. “There are a lot of markets that some [poultry] companies just don’t want to focus their energy on. For what we do and charge, it’s a no-brainer for [the firms].

“It’s also a layer of protection to have a third party. The reason why some companies might use us is some people don’t want to deal direct with big companies like a Tyson or Con-Agra. Tyson is a $26 billion company. [The buyers] may be thinking, ‘I’m so little compared to them.’ Those people may think the traders are more concerned about them. And, we might get them a better price because we know how to deal with [poultry] companies.”

One industry expert said if the local market were inflated up to the poultry trading equivalent, it would be worth at least $500 million. Ratcheted down to the brokerage equivalent, he said, it’s probably closer to $5 million-$10 million.

McClellan said international brokers perform a “very good function” for the chicken business, but domestic brokers are not heavily relied upon.

International brokers can buy products from several companies and put together a break-bulk vessel to ship. A break-bulk vessel can hold up to 15 million pounds of chicken. Only a company as large as Tyson Foods can justify the time and effort into putting together a break-bulk vessel to ship.

A broker can perform a function for 15 companies. Otherwise, each company would need at least two employees doing the selling and scheduling to ship the same product.

The more likely option for the smaller poultry firms would be to use “containerization” shipping, where a truck trailer — holding about 50,000 pounds of chicken — is loaded onto a freight carrier.