Chicken growers getting help

W. Va. takes rare step of filing suit against a poultry company

April 16, 1999|By DAN FESPERMAN | DAN FESPERMAN,SUN STAFF

MOOREFIELD, W.Va. -- The complaints of chicken grower Jerry Hahn are nothing particularly new. They're heard these days in more than a dozen states across America's poultry belt from Texas to the Delmarva Peninsula: Expenses are rising, income is hurting and a big impersonal company has a tight grip on his life and his farm.

"The first year, in '94, everything sort of clicked, just like the company said it would," Hahn said. "But since then, everything has just sort of gone to hell in a handbasket."

What sets Hahn's grievances apart is that his state has taken up his cause, at a time when government officials elsewhere rarely, if ever, challenge the poultry industry on behalf of farmers.

West Virginia Attorney General Darrell V. McGraw filed suit in state court Feb. 24 against Hahn's company, Wampler Foods, and its parent corporation, WLR Foods, alleging "unfair methods of competition" and "deceptive acts or practices" in violation of the state's Consumer Credit and Protection Act. The suit cites everything from the earnings projections the company uses to convince growers to build new chicken houses to its alleged distribution of poor quality chicks and feed to some farmers and preferential treatment of others.

McGraw delayed serving Wampler with the lawsuit for more than a month, in effect holding his fire in hopes of nudging Wampler to offer its growers a better deal. But when the company said that the suit lacked merit and didn't budge, McGraw served notice to Wampler on April 6.

Company fights back

On Wednesday, the company struck back, taking action to move the lawsuit to federal court. In that arena, the company's presumed adversary would be the U.S. Agriculture Department's Grain Inspection, Packers and Stockyards Administration, which has proven to be a less than combative foe.

The agency has fielded more than a thousand complaints from poultry growers around the country but has gone to court on their behalf only twice, resulting in a single penalty in 1996 of $477 in court costs against a small poultry firm in South Carolina.

The more vocal among the 160 growers for Wampler's processing plant in Moorefield hope to fare better by having West Virginia on their side, and tonight they'll take their case to a public forum of government officials at a hearing in the nearby town of Baker.

They will make their case with the likes of Herb Murphy, 50, who said, "The last three years it's been all down hill. We had to re-finance our farm a year and a half ago. We just couldn't make it. Our final payments were always behind, and the bottom line is we just aren't making enough to survive."

His wife works 12 hours a day at an auto parts store and his sons pitch in with some income, too, he said, "or else we'd have already put our sign out."

Family farmers suffering

Wampler growers, and poultry growers in general, are hardly the only American farmers suffering from declining incomes. Family farmers of all stripes have recorded a notably bad year, and some, such as hog farmers, have been devastated by dropping prices for the commodities they grow.

But poultry companies have long touted their farming contracts as being immune to these shocks of the marketplace. And in exchange for offering chicken growers a guaranteed minimum price, the contracts give the companies control over everything from the quality of chicks and feed to the sort of equipment farmers will have to use for feeding, watering and ventilation.

This egg-to-marketplace stranglehold on the process, known as vertical integration, seemed to work well enough as long as a farmer's pay was high enough to compensate for his loss of control.

But in recent years, many chicken growers say, costs have risen steeply while incomes have failed to keep pace.

Below the poverty level

Now, for example, it costs about $257,000 to build two new chicken houses -- the usual minimum to get into the business -- but that investment yields an estimated net income of about half the poverty level for a family of four until the farmer has paid off the loan. With even those estimates coming up short, many Wampler growers say they're not paying off their loans on schedule.

"As far as paying the principal on our mortgage, forget it," said Ed Snell, who runs two chicken houses with his son Daniel. In nine years they've paid down their loan balance of $293,000 to only $268,000.

"When we started out they said we would be able to pay it off in 15 years," Snell said, "but at the rate we're going we won't pay it off in 25 years."

Poor chicken quality

He and others say that besides the stagnant or declining pay and increasing costs for items such as heating fuel, they've been afflicted by weak and diseased chickens distributed by Wampler. The state's lawsuit alleges preferential treatment by the company in distributing stronger flocks to a select group of farmers.

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