The Problem with Contract Poultry Production

Contract poultry producers' feathers are definitely ruffled. At a Campaign for Contract Agriculture meeting and at a government antitrust hearing hosted jointly by the United States Department of Agriculture (USDA) and Department of Justice (DOJ) last week, contract poultry producers made it clear that their industry needs to change.

The lack of competition in the contract poultry industry, they said, allows corporate interests to exert almost complete control over contract producers. That unfair balance of power plunges poultry producers into debt and crushes small family farmers' independence. Corporations have their growers right where they want them: under the company thumb. These farmers are so indebted that they have no power, even though they are the ones taking all the operational risk.

Why, you might ask, is this contract system so terrible? Most American poultry is produced in this system, in which large poultry concerns (otherwise known as “integrators”) contract individual growers to raise birds companies will eventually process and sell.  These growers do not own the birds they raise, but they do own (and own the debt on) the chicken houses they must build to the contracting companies' specifications. They also have to take care of all the waste birds generate.

While even that brief description makes it clear that growers are getting the shorter end of the stick, the situation gets worse. Barns require hundreds of thousands of dollars to build, pushing growers into deep debt that prevents them from rejecting any of the companies' demands.

Companies thus feel impunity to terminate growers’ contracts at will and force them to spend even more money to make specific improvements to their facilities, forcing them deeper into the red. The debts farmers carry are long-term, while their contracts are short (often seven weeks, as long as it takes them to grow a flock). Contracts are also relatively unstable because companies can pull out without serious repercussions.

Kay Doby, a former contract grower and former president of the North Carolina Contract Poultry Growers Association, said that contract growers are like indentured servants. The system, she said, “promises job security in the beginning, but then immediately takes away that security in the form of a contract that is one-sided and can be changed or taken away after the grower has borrowed hundreds of thousands of dollars.”

Growers, in short, are trapped. While the romantic vision of a “family farmer” is of an empowered, self-employed individual in control of his or her own fate, contract poultry growers prove that this is often far from the truth.

Due to the industry's insufficient regulation that allows employers to keep growers pinned down, farmers have no way of demanding fairer treatment or a greater share of the profits. The Alabama Farm Business Analysis Association provides a powerful example: Contract poultry growers in Alabama with five poultry houses had an annual negative net return in 10 of the last 15 years. They are losing money while poultry companies rake in profits. “The poultry companies and retailers haven’t shared profits with growers,” said Mike Weaver, President of the Contract Poultry Growers Association of the Virginias. “Growers are losing money with every flock.”

So the USDA/DOJ hearing comes none too soon. The growers who spoke at the Campaign for Contract Agriculture meeting in Alabama appeared on a panel at the government hearing one day later, telling the assembled power players about their desperate situation in the hopes of inspiring agencies to institute better regulations. The USDA currently has no authority to work against abuses or unfair contracts.

“This hearing on competition in the poultry industry is long overdue,” said Jonathan Buttram, a grower and the President of the Alabama Contract Poultry Growers Association. “We need new regulations and better enforcement of existing laws to start to level the playing field.”

Photo: ralph and jenny via Flickr