Economic impact of a new poultry feed mill in Alabama

County Agent’s Corner

With construction of a new feed mill happening close by, I thought it might be timely to talk about the economic impact something like that can have. The entry of a new $30.2-million feed mill, producing 10,000 tons of poultry feed per week, causes a measurable increase in economic activity in terms of construction and ongoing annual operations. Consider the following economic activity created just during construction and a feed mill’s first year of operation to the local economy.

• Jobs: 499 jobs are supported each year from ongoing operations; 398 during the construction phase.

• Value added: $42.3 million each year from ongoing operations; $25.7 million during construction.

• Labor income: $25.2 million each year from ongoing operations; $18.7 million during construction.

• Output (sales): $207 million each year from ongoing operations; $51.5 million during construction.

• Taxes paid: $5.4 million each year from ongoing operations; $8.5 million during construction.

When a feed mill enters a local economy, it causes a series of new economic activities (impacts) to take place. For this summary, economic impacts are broken into construction (one-time impact) and operations (annual impact).

Construction and operations will generate tax revenue through federal, state, and local taxes. Of the estimated $13.9 million generated in tax revenue, $8.5 million is from construction and $5.4 million is from annual operations. The magnitude of these new economic activities is largely related to the presence of industries which supply a new feed mill.

The construction of a new feed mill requires purchases such as steel, concrete, and milling equipment – including grinders, mixers, pellet mills, and material handling systems. Once construction is complete, the feed mill consistently purchases ingredients and packaging materials, utilizes other services, and purchases many other inputs to produce feed for sale.

The direct purchase of supplies and equipment are known as direct effects. The suppliers and vendors used by the feed mill then must purchase inputs to supply the feed mill. These are known as indirect effects. Those who work in the construction of the feed mill and for the suppliers and vendors then use their additional income to make household purchases (household or induced effects). Taken together, the sum of direct, indirect, and induced effects are known as total effects and account for the total multiplier effect present from the construction and annual operations of a new feed mill.

To arrive at the total effects of a new feed mill, we used the following basic assumptions: 1) average annual production was 520,000 tons; 2) average sales price of $260/ton; 3) cost to construct the feed mill was $30.2 million; and 4) all dollars are in 2020 dollars.

For more details, go to www.aces.edu and Economic Impact of a New Poultry Feed Mill in Alabama, ANR-2673. For more information on many other topics as well as for information on upcoming virtual programs, contact your local Blount County Extension Office at 205-274-2129 or find us on Facebook at Blount County-Alabama Extension.