The name is absent



SOUTHERN JOURNAL OF AGRICULTURAL ECONOMICS

DECEMBER, 1983


SUPPLY RESPONSE TO TECHNOLOGICAL CHANGE AND REGULATION:
THE CASE OF MECHANICALLY DEBONED POULTRY

Douglas W. McNiel, Clark R. Burbee and Howard R. Wetzel, II

The supply of poultry meat is being augmented by
hundreds of millions of pounds annually at little eco-
nomic cost and no increase in the output of chickens or
turkeys. The food-processing innovation responsible
for boosting the utilization efficiency of our scarce food
protein resources is mechanical deboning, a technique
that separates the remaining meat from bones destined
to be rendered into inedible products. The potential
gains to society from further widespread adoption of
this technology could be enormous. Therefore, it is
important to have a clear understanding of the factors
that affect the market supply response to this technol-
ogy, as well as the impact of additional regulations
governing its use.

The purpose of this paper is to analyze the supply
response by poultry processors to this innovation. After
a brief description of the technology and its uses, a
conceptual supply-response model is developed. Us-
ing data previously not available, parameters of the
conceptual model are estimated, and relevant supply
elasticities are calculated. Finally, the model is used to
analyze the possible impact of new regulations affect-
ing the production and use of mechanically deboned
poultry (MDP).

MDP SUPPLY RESPONSE

After chickens and turkeys are slaughtered, some are
marketed bone-in as whole birds or as cut-up parts.
However, a growing proportion of poultry carcasses or
parts are further processed into boneless or commi-
nuted (consisting of minute particles) poultry prod-
ucts. While the major portions of poultry meat are
removed by hand, some meat tissue remains attached
to the bones. It has been common practice to render the
bones and any attached tissue into low-value inedible
products, such as animal feed, since further hand de-
boning was not economically feasible.

The Technology and Its Use

The development and adoption of mechanical de-
boning technology makes this loss of edible poultry
meat unnecessary. Poultry product processors can pro-
cess the hand-trimmed bones and remaining attached
poultry tissue (or even whole birds or parts) through
deboning machines that separate and remove most of
the bone from the attached skeletal muscle tissue. The
resulting paste like product is commonly called me-
chanically deboned poultry.

Production of MDP increased from 196 million
pounds in 1976 (Poultry and Egg Institute) to 330 mil-
lion pounds in 1979 (USDA 1980), about 23 percent a
year. By the end of 1979, 137 deboning machines were
in use in 95 different federally inspected poultry-pro-
cessing establishments. The regional distribution of
these establishments include 16 in the West, 16 in the
Southwest, 26 in the North Central, 15 in the South-
east, and 22 in the Northeast.

MDP is a relatively inexpensive ingredient, selling
for 20 to 40 cents a pound, depending on fat and pro-
tein content. MDP is frequently included as the pri-
mary ingredient in processed poultry products such as
poultry frankfurters, luncheon meats, rolls, and loaves.
No special labeling is required to identify the ingredi-
ent in any poultry product. The utilization of MDP is
contingent upon its functional (binding, texturizing,
etc.) and organoleptic (taste, smell, appearance, etc.)
characteristics, not on public awareness or perceptions
of the ingredient. The low-fat, high-protein content of
the ingredient makes it ideal for use in poultry meat
products that compete against similar types of pro-
cessed red meat products.

Complete information about the final-product use of
MDP is unavailable. However, the frankfurter market
is one example where the significance of the avail-
ability and use of MDP can be clearly illustrated. Ta-
ble 1 shows annual sales volumes and average prices
for three types of frankfurters sold through retail out-
lets for at-home consumption during the period from
December 1977 to November 1980. Beef franks must
contain only beef. Meat franks usually contain a com-
bination of beef and pork, but may contain some MDP.
Poultry (chicken and turkey) franks, which contain up
to 100 percent MDP, are relatively new products de-
veloped to provide poultry processors with new mar-
kets for MDP. Approximately 23 percent of the MDP
produced in 1979 was marketed as poultry frankfurters
through retail outlets. An additional unknown quantity
of poultry frankfurters were sold to consumers by the
hotel, restaurant, and institutional trade.

Over the 3-year period, total retail sales of frank-
furters remained relatively flat, increasing by less than

Douglas W. McNiel is an Assistant Professor, Department of Economics, University of Central Florida. Clark R. Burbee is Branch Chief of the Food Economics program, National Economic
Analysis Division, Economic Research Service, U.S. Department of Agriculture. Howard R. Wetzel, ∏ is an Agricultural Economist, Dairy, Livestock and Poultry Division, Foreign Agri-
cultural Service, U.S. Department of Agriculture.

133



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