The facility, if built in Nebraska’s Dodge County, would create 1,100 jobs, work with local chicken farmers and invest $180 million in the region, the Greater Fremont Development Council said in a release dated Thursday (all figures US$).

Costco, the third-largest U.S. retailer, could not immediately be reached for comment.

The move would offer Costco greater control over its supply chain at a time when food safety rules are becoming tougher, while also allowing it to capture more of the profit margin and respond more quickly to consumer demands, Brett Hundley, an analyst at BB+T Capital Markets, said in a note to clients.

The Nebraska facility, to be run in partnership with Georgia-based Crider Foods, would be the first plant of its kind owned by Costco, Hundley said. The announcement likely contributed to a roughly one per cent fall in shares of Pilgrims Pride Corp., which produces chicken for Costco in Alabama, he said.

A Pilgrims spokesman declined to comment on any relationship with Costco. “The construction of one chicken plant is not going to affect our business,” he said.

The plant would be part of a push for increased livestock and poultry production in the U.S. Midwestern crop belt amid ample feed supplies and low prices. Prices for corn and soymeal, chicken’s primary diet, fell to multi-year lows in recent weeks, before rebounding.

Costco chose Dodge County, in eastern Nebraska, as a “preferred site” for the plant because of the area’s quality workforce, available land, farmers willing to raise chickens and proximity to suppliers, among other factors, the Greater Fremont Development Council said.

Costco plans to buy 300,000 bushels of corn and 3,000 tons of soybean meal per week from local providers, the council said.

Costco is one of the largest U.S. grocers and sells more than 80 million rotisserie chickens a year.

It was not immediately clear whether Costco’s recent pledges to phase out the sale of meat raised with “shared-use” antibiotics and chickens raised in cramped cages factored into its decision to erect a plant.

Both moves are part of industry-wide trends that are shaking up food supply chains.

Wal-Mart Stores last month also made a move to eliminate an intermediary supplier, when it announced plans for its own dairy processing plant in Indiana, marking its first foray into food processing in the U.S.

That announcement also had an immediate impact on shares of a supplier — specifically Dean Foods, the milk supplier to Wal-Marts in the proposed plant’s catchment area.

— Reporting for Reuters by Nathan Layne and Michael Hirtzer in Chicago.

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The guidelines announced on Friday would limit suppliers to using antibiotics to treat and prevent disease, and not for promoting growth, a controversial practice by livestock producers. The move comes against the backdrop of growing concern that overuse of antibiotics in animals can spawn drug-resistant superbugs, endangering human health.

Wal-Mart, the biggest food retailer in the U.S., is also telling suppliers not to raise animals in gestation crates or in other conditions considered inhumane.

While the rules are not mandatory, the retailer is asking suppliers to its roughly 5,200 Walmart and Sam’s Club stores in the U.S. to publicly disclose their use of antibiotics and treatment of animals on an annual basis.

Wal-Mart is now the second U.S. major company to press meat suppliers on the issue. In March fast-food giant McDonald’s said its U.S. restaurants would stop buying chicken raised with human antibiotics in two years.

Advocates welcomed the move and said it would likely pressure other food retailers to follow suit.

“They’re the first ones who have asked for this sort of use data and to make it public. We haven’t gotten that from anyone else, including the U.S. government,” said Gail Hansen, senior officer for Pew Charitable Trusts’ antibiotic resistance project.

In 2013 the U.S. Food and Drug Administration released guidelines for drug makers and agricultural companies to voluntarily phase out antibiotics as a growth enhancer in livestock.

No alternatives

But the extent to which U.S. meat producers are using such drugs is not publicly known. The U.S. Agriculture Department has said it is planning to begin collecting more detailed data on antibiotics used on farms, a potential precursor to setting targets for reducing use of the drugs in animals.

Wal-Mart said the decision to demand greater transparency from its suppliers was rooted in consumer demand. It cited an internal study which showed that 77 per cent of its customers would increase their trust and 66 per cent were more likely to shop from a retailer that ensures humane treatment of livestock.

On matters of animal welfare, Wal-Mart said Friday it’s asking its U.S. suppliers to commit to taking “disciplinary and corrective action” against animal abuse, and to find “solutions to address animal welfare concerns in housing systems, painful procedures and euthanasia or slaughter.”

A company spokesperson wasn’t immediately available Friday to say whether its requests will extend to suppliers of the chain’s Canadian stores.

“Our customers want to know more about how their food is grown and raised, and where it comes from. As the nation’s largest grocer, Walmart is committed to using our strengths to drive transparency and improvement across the supply chain,” Kathleen McLaughlin, senior vice-president of Walmart sustainability, said in a statement.

Tyson Foods, the largest U.S. poultry producer, said in April that it planned to eliminate the use of human antibiotics in its chicken flocks by September 2017.

However, Sanderson Farms, the third largest U.S. poultry producer, said on Wednesday that it planned to continue using antibiotics on its birds, partly because there are no alternatives on the horizon for treating a deadly but common gut disease.

— P.J. Huffstutter and Nathan Layne report on the agriculture and retail sectors respectively from Chicago. Additional reporting for Reuters by Sruthi Ramakrishnan in Bangalore. Includes files from AGCanada.com Network staff.

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The ongoing push by Costco, which sells 80 million rotisserie chickens a year, highlights growing pressure on the supply chain in the wake of this week’s announcement by fast-food giant McDonald’s that it would stop buying chicken raised with so-called “shared-use” antibiotics for its U.S. restaurants within two years.

“We are working towards, and working with our suppliers and the regulatory agencies… to see how we can get rid of shared-use antibiotics in animals,” Craig Wilson, vice-president of food safety at the Issaquah, Wash.-based retail giant, said in a phone interview.

“I think all of us want to move to a point where we can get the human-use antibiotics out of the system. It’s going to take time.”

Wilson and Costco chief financial officer Richard Galanti said the company did not have a target date for reaching that goal, a reflection of supply constraints.

Veterinary use of antibiotics is legal. However, as the rate of human infections from antibiotic-resistant bacteria increases, consumer advocates and public health experts have become more critical of the practice of routinely feeding antibiotics to chickens, cattle and pigs.

Scientists and public health experts say whenever an antibiotic is administered, it kills weaker bacteria and can enable the strongest to survive and multiply. Frequent use of low-dose antibiotics, a practice used by some meat producers, can amplify that effect. The risk is that so-called superbugs might develop cross-resistance to medically important antibiotics.

“Beyond everything”

“I mean, you’ve got to protect human health beyond everything, and so we think eliminating shared-use antibiotics is the right way to go,” Wilson said.

The U.S. Food and Drug Administration has issued voluntary guidelines to regulate antibiotic use by producers of poultry and other livestock. Antibiotics rated medically important by the FDA for growth promotion are scheduled to be phased out by December 2016.

Wilson said Costco has been working with the FDA and the Centers for Disease Control and Prevention on the goal of eliminating shared-use antibiotics. The Center for Veterinary Medicine is involved in the effort as well, he said.

In Canada, the national chicken producers’ body set a mandatory policy in place last May halting preventive use of “Category I” antibiotics — those considered to be of the highest importance in treating serious infections in people.

The Canadian arm of McDonald’s said this week it would evaluate its chicken suppliers’ use of antibiotics but had no plans yet to follow the U.S. chain’s move.

A+W, Canada’s No. 2 burger chain, announced last October its chicken menu items would come only from birds raised without the use of antibiotics.

Over the years Costco has grown into one of the largest retailers of food. Fresh food, including meat, produce, deli and bakery items, accounted for 13 per cent of its $110 billion in net sales in the last fiscal year ended Aug. 31.

As of next Thursday, the chain’s Canadian arm will operate 89 warehouse stores in nine provinces.

— Nathan Layne is a Reuters correspondent covering the retail and consumer products sectors from Chicago. Includes files from AGCanada.com Network staff.

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