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CoBank: Costco’s Nebraska project could start vertical trend

A livestock economist says the Costco chicken complex being built in eastern Nebraska could serve as a model for other food retailers and food service companies to vertically integrate in other protein sectors.

Will Sawyer with CoBank says Costco’s project is the first time a U.S. retailer has integrated its meat supply to the farm level.

“We’re about a year away from the plant actually starting up. But if it’s successful, we think we could see other food retailers take a look, especially at the poultry space, for expansion of their supply chains and becoming more vertically integrated,” Sawyer says.

Of the three major proteins, Sawyer says poultry is the most appealing for retailer integration. But he says it comes with a certain amount of risk.

“As a meat producer, Costco is going to be exposed to feed costs in a way they haven’t in the past, and disease and trade—and a lot of variables that have impacted their business further down the supply chain,” he says. “But now it’s going to start all the way at the farm level.”

The Costco plant, located in Fremont, Nebraska, will process two million chickens per week to be sold at Costco stores. The company managing the project, Lincoln Premium Poultry, is in the process of recruiting growers. As of early September, LPP was at 60 percent of their goal of 125 growers.

AUDIO: Will Sawyer