Costco chicken

Rotisserie chickens cook at the Costco store in La Vista in October. The retailer now wants its own supply chain of chickens, so it has purchased land near Fremont, Nebraska, for more than $8 million to build a chicken processing plant. The land sold for about $20,600 an acre, more than three times the average price of farmland in the area. 

Costco has closed on the purchase of land near Fremont where it looks to build a chicken processing plant — paying a big premium over average farmland prices in the area — and now has more than enough farmers interested in raising the chickens, a project representative said.

Those are the latest milestones in the retailer’s journey to creating its own chicken supply chain to serve its warehouse stores, known for their $4.99 rotisserie chickens.

The project is under review by state and local permitting offices, and project officials expect to break ground this spring, with the plant operating two years later.

Still, an opponents group continues to protest the project, and a lawsuit over tax-increment financing for the project has a June court date. In a series of meetings this week hosted by Nebraska Communities United, a speaker warned farmers around the region to analyze their contracts and expenses carefully before signing on.

“This business basically treats farmers like an expendable resource,” Craig Watts, a North Carolina farmer who has raised chickens for Perdue, said Thursday in West Point, Nebraska.

Watts has spoken out against common chicken industry contract practices that penalize farmers for below-average production. Lincoln Premium Poultry, the company that will run Costco’s chicken operation, has said it will use a different type of contract, in which farmers have a guaranteed base pay.

Lincoln said it has plenty of interest from local farmers. About 125 farmers, who could operate about 500 barns, have signed applications to participate, project manager Walt Shafer told The World-Herald this week. That’s more than the 400 barns needed, but Lincoln is continuing to accept applications. Farmers have not yet signed contracts; that would happen after a site visit and after a farmer shows that financing and local permitting approval are in place.

Costco paid $8,550,000 for the 414 acres of land — about $20,600 an acre. The average price of farmland in east-central Nebraska is $6,330 an acre.

“For us, it was a good business transaction, and we’re happy,” said land seller Fred Culp, a Nebraska native now living in Albuquerque, New Mexico. His family-run Hills Farm owns land around Nebraska, Culp said.

The land has been in his mother’s family since 1888, when his great-great-grandfather owned it as part of a land-development business. With proceeds from the sale, he said, the family plans to buy about 800 additional acres of farmland in Nebraska.

Even though the Costco land has been used for farming, he said an industrial plant is a good fit for it. The site will house a processing plant, chick hatchery and feed mill.

“It’s right next to the Hormel plant. It’s sort of like a neighborhood of industrial agriculture,” Culp said of a plant that produces pork products nearby.

Local land broker Jay Nitz, who was not involved in the sale, said the planets aligned for the sellers after the first site that Costco considered fell through. Officials in Nickerson, a village north of Fremont, killed plans for the plant outside their community after residents protested.

Nitz summed up Culp’s luck this way: “They hit the lottery.”

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