Dispute In Chicken Industry

October 11, 1994|By Kim Clark | Kim Clark,Sun Staff Writer

A political battle has erupted within the normally harmonious Eastern Shore poultry industry over a state plan to provide $5 million to big processors like Perdue Farms Inc. to compensate for losses to avian disease epidemics.

As state Department of Agriculture officials work to set up a program before the avian influenza season hits this winter -- and before Gov. William Donald Schaefer leaves office -- some chicken farmers are squawking.

The farmers say Maryland taxpayers shouldn't be forced to subsidize the eight big processors that dominate the Shore's chicken industry. But if the state insists on repaying the industry for epidemic losses, the farmers say they should receive the assistance because they face financial ruin when they lose a flock.

"We would sit there with no income and still have mortgage payments, tax payments," said Frank Morison, president of the 400-member Delmarva Contract Poultry Growers Association.

Meanwhile, he said, "The companies receive corporate welfare . . . The taxpayers will support Perdue and Tyson . . . I'm just disgusted."

State officials concede the plan they are contemplating would result in payments to only the big processors. The reason: The state is legally obligated to pay only the owners of destroyed livestock to help stem an epidemic. And on the Eastern Shore, the large processors own the chickens, which are raised by farmers under contract.

But the proposal will also help the small growers, state officials say, because it would expand the state's role by also paying for the destruction and disposal of the birds and for disinfecting chicken houses. Currently, growers are responsible for composting dead birds.

If the growers want to be protected against epidemic losses, they should negotiate better contracts with the processors, said Henry Virts, assistant secretary of the Agriculture Department.

"What the growers ultimately get depends on their contracts," Dr. Virts said. "That's between them and the companies."

Dr. Virts said the state first started considering an assistance fund after a 1983-1984 avian influenza epidemic wiped out more than $60 million worth of chickens in Pennsylvania.

The chicken industry is crucial to the Eastern Shore's economy. Last year, the eight major processing companies produced 548 million chickens and employed more than 22,000 people.

Maryland's fund would be patterned after a $5 million fund created in Delaware in early 1993. Dr. Virts said.

Under the Delaware plan, and the Maryland proposal, the processing companies would each have to pay the first $100,000 toward the cost of killing the chickens and disinfecting chicken houses.

The companies have agreed to contribute a total of $2.5 million to the assistance fund. Only after the companies' money is used up would the $5 million in state money be tapped, Dr. Virts said.

That means the state might never have to pay out the money, since most outbreaks are small. An outbreak of avian disease that wiped out an Eastern Shore game bird hatchery last year cost the state about $230,000, he said.

The proposal could save the state money, he added, since the government is currently obligated by law to reimburse the owners 90 percent of the destroyed animals' value, he said.

Dr. Virts said he and other officials are now trying to figure out where to get the money to create the fund. They hope to set it up without having to go before the General Assembly.

"Flu season is the winter season," Dr. Virts said. "It would be be nice if Governor Schaefer could sign" the proposal into law by then. Mr. Schaefer has supported the plan since signing a four-state agreement in 1987 to protect the industry against disease.

Poultry industry officials insist that the growers who oppose the fund are a tiny minority and that it is appropriate for the state to provide assistance to the large processors.

Bill Satterfield, executive director of the Delmarva Poultry Industry Inc. (DPI), which represents the large processors as well as many growers, said yesterday that growers in Delaware approved of that state's fund. "They saw it as a necessary step to prevent the spread of a very contagious disease," Mr. Satterfield said.

The companies "are not going to make a profit" on the fund, he said.

Besides, he said, many companies offer growers a small payout in case of a disastrous loss.

Val Bembenek, spokeswoman for Perdue, said yesterday the Salisbury-based chicken company supports the state plan but would also support a plan that compensates anyone -- including growers -- who suffer losses due to disease.

Currently, Perdue's growers can receive payments if flocks are wiped out by fires or other disasters, but not necessarily if the flocks are diseased, she said.

Although the DPI, which represents many growers, has publicly supported the plan, "maybe it needs more input" from other growers, Ms. Bembenek said.

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