Chicken Farmers Describe a System of Extortion and Economic Slavery
Posted May 21 2010 2:05pm
This post was written by Regina Weiss and was originally posted on the Green Fork .
Attorney General Eric Holder urged to enforce antitrust laws to protect poultry growers
Today, poultry growers from throughout the south told Attorney General Eric Holder that the US poultry business operates through price fixing and production controls that stifle fair competition and destroy the lives of family farmers. According to the growers, who spoke at a hearing in Normal, Alabama, they are trapped in an unsustainable system that leaves them with skyrocketing costs, poverty wages and zero job security. As one grower put it, “This system takes hard working farmers and makes them indentured servants on their own land.”
While many of us understand the importance of the nation’s civil rights and environmental laws, less attention has been paid to antitrust jurisprudence. Yet, it is the source of vital legal protections for consumers and small businesses – at least when the laws are applied and enforced. In the United States, antitrust laws first arose in response to public anger over the control of essential products by groups of related businesses, known as trusts or cartels. These cartels arbitrarily set prices, regardless of a product’s quality, by conspiring to shut out competition.
Since 1960, the amount of chicken meat produced in the United States has grown by 600 percent, supplying an increasingly global market for chicken fingers, chicken nuggets and other fried and breaded abominations. Meanwhile, four U.S. companies have formed a cartel that controls a majority of all this chicken – poultry that today is almost exclusively raised by people who don’t actually own the birds.
Through a business model of aggressive vertical integration, huge poultry companies in the US own and control the birds, the mills that produce the poultry feed, the factories where the birds are incubated and hatched, the trucks used to transport the chicks, grown chickens and meat, and the factories that butcher the birds and package the meat. Today, more than 90 percent of all poultry in the United States is raised by growers under contract to these vertically integrated poultry companies, rather than being raised and sold by independent farmers. Not surprisingly, the open competitive market for chicken meat has disappeared.
The contract growers who actually raise the birds earn, on average, about 5 cents a pound for the poultry. To put it another way, according to testimony from West Virginia poultry grower Mike Weaver:
When you purchase a twelve piece chicken meal at Kentucky Fried Chicken or any other fast food restaurant it costs you about $26.99 in our area. The grower who raised that chicken only received about $.30 cents.
The poultry growers who attended today’s hearing describe an industry that sounds like nothing so much as the old con man’s game of “bait and switch.”
When I retired from teaching in 1993 and was considering the construction of two, 500-foot chicken houses, I was promised a long-term relationship as long as I raised a good bird or followed the company’s instructions. Initially, I was provided a contract for the ten-year length of my loan. However, a few years later, the company brought out another version of the contract and said I needed to sign it to continue to get chickens. Before the end of the initial ten-year term, the company again changed the contract to a one-year term. I came to realize that the company could change contracts easily by threatening to stop placing birds if I refused to sign. – Kay Doby, former president of the North Carolina Contract Poultry Growers Association
The poultry companies require enormous investments in infrastructure before they will enter into a contract with a grower. But while the grower must take on huge mortgages for periods of from 10 to 30 years in order to satisfy the companies’ requirements, most are only guaranteed work on a “flock to flock” basis – that is, for about seven weeks at a time. Meanwhile, in addition to their mortgage debt, the growers are liable for waste disposal (and any environmental damage that might result), as well as for maintenance of barns and equipment that the companies can leave vacant and unused for weeks or months at a time – periods during which the grower earns no income.
The companies also “rank” the contract growers against each other to decide whether to terminate contracts or otherwise penalize growers. The problem is that the companies also control these rankings through decisions they make about the age and health of the chicks and the quality of the feed they provide to the growers, leaving them unable to complete on anything like a playing field.
Mississippi poultry grower Andy Stone described his life this way:
This insecurity hangs over my head each day that I grow chickens. You could argue this and say, No one’s job is secure in today’s economic environment. But the situation is not the same. Their job is a job. Mine is a job with a huge debt attached to it. . . . The situation in contract poultry growing is out of control.
The Sherman Act, the nation’s first antitrust law, passed in 1890, made it illegal for businesses in the same industry to make agreements that limit competition. The Packers and Stockyards Act, passed in 1921, made it illegal for a poultry dealer to engage in unfair or deceptive business practices. According to advocates, however, the Stockyards Act is especially poorly enforced due, in part, to the fact that the Department of Justice and the Department of Agriculture are jointly responsible for its enforcement.
Meanwhile, poultry growers point to what they perceive as collusion among members of the poultry cartels:
When I started growing chickens in 1995, I bought land and moved sixty miles from where I grew up. I moved to the broiler capital of our state. I did this thinking that if I had a reason to switch from one integrator to another, I could. After a few months into the business I realized that the integrators have an unwritten pact with their “sister” integrators – “You don’t take our growers, and we won’t take your growers.” – Andy Stone
Equally sinister is the fear of retaliation that can deprive any grower of his or her income. As Kay Doby described it:
Another ugly reality in poultry is that growers are often intimidated by company personnel. Growers that are here today know they are taking a big risk by being here and especially speaking about how things are done in the contract poultry business. I had a grower tell me that he was complaining to company personnel about the quality of chicks he received and the answer he got was, “You know, you should just be glad you got a job.” The grower got the message real quick, since the company he grows for has over 160 poultry houses sitting empty and the growers have no way to pay the loan payments.
Many areas have only one or two chicken processors, which leaves growers few options except taking whatever contract they are given. When companies have this much control over the food supply, they make all the decisions, and farmers and consumers pay the price.
Today’s meeting was the second in a series taking place this year in which the US Department of Justice and the US Department of Agriculture are hearing public testimony on antitrust issues in agriculture. The first, held on March 12 in Ankeny, Iowa , focused on issues facing crop farmers. The next hearing is scheduled for June 25 in Madison, Wisconsin, and will focus on the dairy industry.
You can read recommendations for reform of the US poultry contract system in testimony submitted to the Department of Justice and Department of Agriculture.