Growers to Pay Price for No Antibiotic McNuggets

CHICAGO/LOS ANGELES (Reuters) - McDonald's Corp's decision last week to phase out human antibiotics from its U.S. chicken supply will add to costs of production in a tight-margin business that are likely to be borne mostly by poultry companies.

McDonald's, whose top chicken suppliers include giant Tyson Foods Inc, has given its producers two years to eradicate all antibiotics used on humans from barns and hatcheries. It's going to be expensive and may take longer than planned: switching to antibiotic-free chickens could increase on-farm costs by up to 3 percent. Perdue Farms, a supplier with about a third the volume of Tyson, told Reuters it's taken more than a decade and millions of dollars to make such a change.

McDonald's will use its purchasing muscle as the world's largest restaurant chain to avoid passing extra costs on to customers, increasingly lower income as more affluent diners prefer competitors like Chipotle Mexican Grill Inc, said analysts including Morningstar's R.J. Hottovy.

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