Great job with her. I think it's very important that they understand how life works, and that chicken does not just *appear* at the grocery store.
I've tried to instill that in my two-year-old daughter as well. We recently had a rooster day where we processed 9 roosters, so we've been having them for dinner occasionally. Recently, my daughter and I had the following conversation while eating chicken dinner.
Her: Is that a chicken?
Me: Yes, it is.
Her: What kind of chicken was that?
Me: That was an Australorp rooster.
Her: Oh... is that a *dead* chicken?
Me: Yes, it is dead, sweetie.
Her: Oh... Who killed that chicken?
Me: Dad and I killed that chicken so we could eat it for dinner.
Her: Oh... That chicken is delicious!!! Thank you for dinner, chicken!!
That last part was my favorite... "Thank you for dinner, chicken"