A Chicken Deal

July 28, 2010 11:47 AM
 

TopProducer@farmjournal.com

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Norman Ranger of Oklahoma spoke up about unfair practices by poultry contractors at a joint USDA and Department of Justice workshop in Alabama.
 

Competition in Agriculture webGarry and Denise Staples are relative newcomers to the world of contract chicken growing. The Alabama couple has been at it for only nine years but have already seen enough changes in the poultry industry to give them concerns about their future.

At a recent joint U.S. Department of Justice (DOJ) and USDA workshop on competition in agriculture, the second in a string of hearings nationwide, Garry spoke up about conditions within the industry.

The Staples’ biggest concern is the diminishing length of the contracts they’ve been presented on a "take it or leave it" basis. Their first contracts were for seven years, enough to give them and their lender some security, Garry says.

As the Staples added chickenhouses, the length of the contracts grew shorter—to the point where they now operate on a "flock to flock" contract. When current flocks are grown out, the company could stop bringing new birds, putting the Staples’ $250,000-per-building investment at risk.
 
Mixed Emotions at Hearing. A contract system between big chicken purveyors and producers has been standard for decades. Under the system, food companies, such as Tyson or Perdue, provide chicks and feed to farmers, who in turn raise the birds for a set price. By agreeing to upfront contracts, farmers can avoid big market fluctuations.

But concern that contracts are leading to a lack of competition in the poultry industry is what DOJ and USDA are investigating. The goal is to prevent cases like the one in Oklahoma, where a jury issued a $7.3 million verdict against Tyson for using what plaintiffs claimed were deceptive and coercive practices against farmers. Tyson denies wrongdoing and vows to appeal.

U.S. Attorney General Eric Holder and Ag Secretary Tom Vilsack were on hand at the workshop at Alabama A&M University, where a crowd of 500 packed a meeting hall. Attendance and testimony was dominated by growers like Staples.

The National Chicken Council, whose integrator members account for 95% of the industry, announced a new industry-sponsored study that declares: "Competition is alive and well in the broiler chicken industry and benefits chicken farmers, poultry companies and consumers." The study also claims that about 75% of poultry growers are satisfied.

Yet dozens of farmers walked up to the microphones to tell tales of frustration with poultry companies. Oklahoman Norman Ranger, who grew chickens for 22 years, told of getting out of the business 10 years ago after encountering conflicts with his integrator. Ranger wants USDA to change the rules that allow companies to require facility upgrades at farmer expense. Forced chickenhouse upgrades were the most common complaint at the workshop.

Attorney General Holder cautioned: "There is a new attitude in the Department of Justice that is appropriately aggressive." Ag Secretary Vilsack acknowledged that conflict between some poultry growers and the companies is a "difficult issue" and vowed to work with Packers and Stockyards Act officials to see that such issues are addressed.

Staples points out that while dozens of frustrated growers attended the workshop, "many of my neighbors are afraid to speak up for fear of retaliation from contractors." 

But Staples says he wasn’t brought up to be quiet. "I’m from America, and if I can’t say my piece, then this isn’t America.



Top Producer, Summer 2010

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