Posted by Dave on May 28, 2010
By Dave Murphy
For America’s remaining 30,000 poultry growers, the Department of Justice and USDA’s joint workshop on competition in the poultry industry held last Friday in Normal, Alabama has been a long time coming. For some, it arrived too late. As the second of five DOJ/USDA hearings to be held across the country this year, many attendees felt this hearing was more balanced than the previous hearing in Iowa, but still left many wondering what the overall impact these hearings would have in such a highly consolidated industry which continues to force so many family farmers out of business.
Of the seven chicken producers that opened the session’s morning Roundtable Discussion on Poultry Grower Issues, four of the farmers, were “former producers”, which was a foreshadowing of the theme of the day; that poultry farmers daily face fear, uncertainty and intimidation from those companies they contract with, otherwise known as “integrators”.
In the weeks leading up to the Alabama workshops, many poultry farmers across the country reported threats from the broiler company representatives, warning them that they would face negative consequences if they spoke at the event, or even attended.
Sitting next to Secretary Vilsack, former North Carolina poultry grower Kay Doby told the audience, “The growers that are here today are in jeopardy because of intimidation by company personnel. They’re taking a big risk. Every grower here is taking a big risk.”
One poultry grower I spoke with the day before the event, refused to give the name of the company that he contracted under or even the state he lived in for fear that they would find out he attended the event. This type of intimidation is a clear sign of just how powerful and arrogant these companies have grown; that in the face of a Department of Justice investigation, they feel comfortable enough to make these types of threats to farmers simply trying to air their grievances.
Many Americans may have had their first exposure to Big Chicken’s corruption when they saw the Oscar-nominated documentary, Food Inc., which explores the dark underbelly of America’s food system. In the film, Maryland chicken grower Carole Morison loses her contract with her poultry processor when she refuses to pay for expensive upgrades to her buildings.
Testifying at the Alabama hearing and speaking directly to Secretary Vilsack during the morning panel, Morison, who grew birds for one company for 23 years, described how Perdue, one of the top four poultry companies, terminated her contract only a few weeks after she received an award for being an “Outstanding Producer.”
For Morison, the upgrades would have come with an additional $150,000 price tag, a debt that her family could not have regained with the ever-changing contracts with Perdue.
At the same time, Morison noted that there were three other poultry processors in her area, but in the murky world of agribusiness, none of the other integrators would offer her a contract as a grower. For those not familiar with the poultry industry, there is an unwritten pact between poultry companies that each of them abide by: we won’t poach your growers if you don’t poach ours. For a farmer who falls out with one integrator in their area, it spells financial doom as no other company will pick up their contract to grow birds if they leave their current integrator. This type of collusion has not only limited opportunities and markets for farmers, but also put tem in a position where there is no other option than to comply with the corporation’s “take it or leave it” contracts and constantly shifting demands.
Production Contracts and Upgrades: Competition or Collusion
Today’s broiler industry has split ownership of risk and reward to where all the benefits tilt toward the corporation. As is standard with modern production contracts, the highly vertically integrated poultry companies own the chickens and deliver the feed, medication and veterinary services while it relies on individual growers to take on debts of $500,000 to $1 million to build expensive specialized buildings. Once growers have put up the costly buildings, they are on a constant treadmill to pay off their mortgage, while the poultry processors use the limited market to put further downward pressure on growers.
In a country where competiveness and gaining an advantage over your competitor is supposed to be the name of the game, even Assistant Attorney General for Antitrust Christine Varney seemed surprised by the failure of market forces to work in instances like Morison’s.
In an effort to understand the issue further, Varney asked Morison to speak on the “competitiveness on the contracting side” in the poultry industry.
“I’m very interested in your experience, after 23 years, when you were terminated, where you able to switch integrators? Were you able to go somewhere else?” Varney asked.
“No, we weren’t able to switch integrators. Again, even though there’s four integrators in the area, what one wants, they all want,” replied Morison.
“How does that actually work? I would think that a grower of your reputation should, in a competitive market, it should be fairly easy to switch.”
Morison explained that even if another company were to offer her a new contract, she would still be forced to pay for expensive upgrades to her buildings that make it impossible for poultry growers ever to step out of debt. As a result of this debt, poultry companies exert almost unlimited control in rural areas, offering farmers no place to turn.
Morison’s claim was backed up repeatedly throughout the day, including by fellow panelist, Kay Doby, a retired school teacher, and former poultry grower who was also forced out of the industry for refusing to do mandated upgrades.
Like many growers, Doby, spoke about the unfair contracts and the corporation’s promises of a long-term relationship with a 10-year contract when she first signed with the company. After several years, the company forced her to sign another contract, then another, until the mandated upgrades would have made it virtually impossible for her to pay off the original loans.
To keep up with the ever changing demands of poultry integrators, Doby says farmers are often forced to take off-farm jobs or refinance their homes and farms to pay off the debts, until “10 and 15-year poultry loans are turning into 30-year poultry loans, with no more than a flock-to-flock guarantee,” exclaimed Doby.
For some farmers, especially in a down economy, with a half million to $1 million in debt hanging over their head, the pressure has become too much. In an emotional part of her testimony, Doby told the story of how one poultry grower in her area committed suicide only the week before the Alabama hearing.
“This past Monday morning in North Carolina one of these growers went out, drove down a country road. He was terminated from his contract, about to lose his home. Took a gun and ended his life,” said Doby.
“That’s what were talking about today, this is personal. It gets real poultry growers,” Doby said, fighting back tears.
Secretary Vilsack reached out to comfort her as she finished her plea for the Department of Justice and USDA to help struggling contract poultry farmers confront an industry rife with abuse.
For many poultry growers in the audience this story struck home as they have been forced to bear an increasing portion of the industry’s efforts to “maximize profits” while watching their own personal financial situation worsen.
Here's a clip from the DOJ/USDA hearings with a portion of Kay Doby's testimony:
Industry Trends, Vertical Integration and Intimidation
In the past four decades, no other segment in agriculture has become so vertically integrated than the poultry industry, with broiler companies owning virtually every stage of production except the growing houses. Today nearly all, more than 90% of poultry growers, survive on the terms dictated in unfair production contracts crafted by the likes of Tyson, Perdue and Pilgrim’s Pride.
While poultry companies have defended such contracts as the best way to supply America with a steady supply of cheap chicken, from breast meat to chicken nuggets, for the farmers who sign them, these contracts have become a fast track to indentured servitude.
One grower who testified at the hearing said he had “a good relationship” with his integrator, but was troubled by the uncertainty that flock-to-flock contracts left him with, was Garry Staples, from Steele, Alabama.
Staples, who spent 20 years in the U.S. military, spoke in a gravelly voice with a Southern drawl that commanded both respect and concern, talking about his own personal debt load of $1.5 million, with his home and farm mortgaged as collateral but no guarantee beyond a flock-to-flock contract to survive.
Staples wondered aloud, if the contracts were so good, why would none of the poultry companies back them up with a contract for the life of the building.
He also mentioned the fear that many growers in the room felt as well, becoming emotional at the thought that such a thing could happen in America, a country that he proudly defended for two decades.
“And although I came here on my own today, it’s not without a lot of worry that I’ll have some retaliation,” Staples added.
Later in the session, Staple's comment drew a pointed response by DOJ Antitrust chief Christine Varney.
“I fully expect you will not experience retaliation,” Varney told Staples as she handed him a piece of paper.
“But if you do, call me at that number.”
In some ways, Varney’s promise to protect poultry growers was the highlight of the day.
But it became clear to the audience listening to the dozens of farmers who testified after the lunch break, that Big Chicken has no respect for the law and possibly an even a longer reach than justice.
During an hour-long public testimony session, one Alabama farmer told his story of what happens when you stand up to Big Chicken. For Tony Goolesby of Hennager, Alabama, the ability of the large poultry company’s to pervert justice was brought home when he refused to sign a new contract.
Like many poultry growers before and after him, once Goolesby had erected his buildings and operated for a while, his poultry company came to him and demanded that he sign a new agreement, despite the fact that there were several years still left on his initial contract.
Goolesby, like any good businessman, refused and stated that he was happy with his current contract. That’s where his trouble began. Immediately, the company threatened to remove the chickens from his farm the next morning.
When Goolesby met them at the end of the driveway at 6 am, the trucks turned back. Then, without his knowledge, the company’s lawyers met in a secret session with a local country judge. The following morning, without ever having been contacted by the judge or the company attorneys, a swarm of trucks and local sheriffs arrived at his farm with a warrant to remove the birds.
Ultimately, Goolesby told the story of how he was pulled out of his truck and arrested on his own farm, only to spend 24 hours in jail. When his case went to trial, Goolesby won a jury trial, but the local judge threw out the verdict and he was forced to appeal, eventually settling with the company, but not before losing nearly all of his farm except his home.
Many growers in the audience shook their head knowingly as Goolesby told his story. In rural America, stories of corruption and abuse of power are well known. As a result, for the past three decades there has been a virtual wall of silence as growers have seen what happens to those who dare to speak up.
For the majority of family farmers and rural Americans, the Obama administration’s look into competition and antitrust issues in the food and agriculture sectors is a welcome and much needed investigation into abusive contracts, corrupt behavior and outright violations of U.S. anti-monopoly legislation, but, like the Health Care and Wall Street reform battles, many wonder if this administration has the stomach to actually take on Big Food.
So far, the administration’s attempts at reform in other areas have been half-measures, feint stabs in the dark that have pandered too much to corporations that have caused the problem in the first place and not focusing enough on protecting American citizens from future and present abuses. Neither Obama nor the family farmer can afford this same tact in food and agriculture, as it may be rural America’s last chance.
Farmers, like many Americans are tired of tough talk. It’s time for action.
If you want this type of abuse to end, sign this letter to Attorney General Eric Holder and Secretary Vilsack asking them to enforce America's antritrust laws and break up Big Food.