Source: The Guardian
Corporate control is a curse for farmers like Rudy Howell who are burdened with debt and have no alternative buyers
Back in the 1990s, Rudy Howell, then in his mid-50s, took over his father-in-law’s poultry contract business in North Carolina. He and his wife hoped it would provide a decent income they could combine with their small pensions to fund a comfortable retirement.
Instead, Howell, now 70, finds himself working long hours, deep in debt and earning less than $40,000 (£30,654) in 2019 – well below the average US wage. He spoke to the Guardian about his situation. “It doesn’t matter what I do, I can’t get above water. I do the same thing every time and the payout per flock can vary by as much as $8,000. Our output depends on their input.”
Like nearly 90% of US poultry producers Howell is not an independent farmer who can buy and sell his chickens to whoever he wants. He is contracted exclusively to Perdue Farms, one of the largest poultry companies in the US. The company, which produces a number of other agricultural products and services, generates more than $6bn a year in revenue.
Over the past half century poultry farming in the US has become increasingly consolidated among a handful of companies. Tyson Foods, Pilgrim’s Pride, Sanderson Farms, Koch Foods and Perdue control about 60% of the US chicken market. The companies own and operate all the means of production, including the feed mills, slaughterhouses, trucking lines and even the hatcheries that develop the best strains of chickens.
In the 1960s, poultry companies experimented with owning and operating chicken farms, but realised it was the least profitable, highest risk part of the supply chain. Instead they moved to the current system, persuading independent contracted farmers to take on this responsibility instead, and the system has reaped rich profits for those at the top. From 1981 to 2018, farm sales of chickens increased from $4.5bn to $31.7bn.
But contracts typically hand a remarkable amount of control to the parent company. In this case, Perdue maintains ownership of the birds, and the contract stipulates that farmers can only use feed, medication, vaccinations and other supplies provided by or arranged by Perdue. The contract also grants Perdue the authority to determine the breed of chickens produced, the numbers in each flock, the time allowed for processing each flock, and placement for future flocks.
Howell and his fellow poultry farmers are so far from independent that in March 2018 the small business administration office of the Inspector General issued a report stating that most poultry farmers do not qualify as independent businesses eligible for loans from the agency because integrators exert so much control over them. “This control overcame practically all of a grower’s ability to operate their business independent of integrator mandates,” it concluded.
“They [Perdue] call themselves a family farm, but they’re a corporate farm. They have control over everything out here,” said Howell.
‘They never get out of debt’
It’s a system that has been criticised by farm support groups, because it prevents farmers from changing poultry producer or leaving the business due to the amount of debt accrued to get started and maintain the business.
The average estimated debt required to build one chicken house is $300,000, with farms usually containing at least four. The bank debts immediately lock producers into depending on their contract to meet repayments. Howell says he is also mandated to take on farm upgrades as required by the company.
“It’s a combination of long-term debt through a contract and a very high cost of exit. For the company, it’s a short-term commitment. The farmers are at a huge disadvantage,” said Scott Marlow, senior policy specialist at the Rural Advancement Foundation International-USA. “By the time the farmer pays initial debt, they have to buy new equipment so they never get out of debt, never get to the point where they’re not in significant debt.”
Howell has little alternative but to stick with Perdue. In Robeson County, North Carolina, where he farms, there is only one other company, Mountaire Farms, to do business with, but the changes it would require to meet different standards would demand a massive amount of starter debt.
Perdue told the Guardian that Sanderson Farms and Pilgrim Farms also operate in the area. In fact, as far as we could discover, Sanderson Farms only operates hatcheries and a processing plant, not chicken houses. Pilgrim Farms told the Guardian it does not operate any houses in the county.
‘There’s a sense of hopelessness’
Today, the handful of companies controlling 90% of the poultry market in the US are currently under federal investigation over allegations they coordinated to fix prices. This price fixing makes it nearly impossible for individual farmers to survive independently without a niche or speciality market. Perdue declined to comment on the pending litigation.
Developing a niche market and trying to compete with Perdue is virtually impossible, says Craig Watts, a former contract grower with the company. “There’s a sense of hopelessness among farmers. Half a million dollars worth of debt makes a man very agreeable so they’re not going to rock the boat too much. Most people hang on and continue,” he said.
Howell says he gets paid .052 cents per pound of chicken, with deductions or bonuses decided by a so-called tournament system covering every other farmer in the area. Farmers who produce the most amount of weight with the least amount of feed receive the bonuses on top of base pay, while less efficient farmers have money deducted.
Howell claims he is charged with the responsibility and costs of incinerating unusable birds in flocks provided by Perdue, but isn’t compensated for the birds sent to him in poor condition. “They send us bad [low quality] feed out here, you get bad birds, they send us bad birds, we’re going to get bad birds. In the past year, they’ve been sending a lot of culls, little birds you can’t do anything with and have to kill them.”