Poultry growers, chicken processors at odds

Federal proposal to offer contract protections to chicken growers is opposed by companies

  • Carole Morison is pictured with chicken houses on her property. She and her husband were poultry growers for Perdue for more than 20 years, growing a flock at a time from newly hatched to about 7 weeks old. Her contract was dropped two years ago by the company because she refused to make an estimated $150,000 worth of changes to her chicken houses.
Carole Morison is pictured with chicken houses on her property.… (Baltimore Sun photo by Algerina…)
July 19, 2010|By Lorraine Mirabella, The Baltimore Sun

When Carole Morison got into poultry farming 23 years ago, she and her husband built chicken houses on their Pocomoke farm to specifications set by their biggest customer — Perdue Inc. — and made upgrades the industry giant required over the years.

That relationship abruptly ended two years ago, when Morison refused to spend $150,000 on a permanent enclosure requested by Salisbury-based Perdue, which in her view would be too costly and unhealthy for the chickens. Perdue subsequently dropped Morison as a grower.

"All farms have a mortgage, and it's constantly 'Go back and borrow more money and get deeper into debt' with no end in sight," Morison said. "You would never recoup that investment."

Stories like Morison's are a driving force behind federal protections being shaped this year for independent farmers who say they are at the mercy of big poultry processors like Perdue and Tyson Foods Inc., which set the rules for independent growers that raise their chicks and largely control the industry.

In Maryland, the industry generates nearly $800 million in annual revenue and accounts for 40 percent of the state's agricultural cash receipts. The state has 710 contract poultry farmers who grow chickens and turkeys, statistics from the U.S. Department of Agriculture show.

Representatives of chicken processing companies argue that their flock-to-flock contract system gives growers a guaranteed market and little risk, since the companies provide the chicks, feed and delivery services.

The proposed federal protections, which the 2008 Farm Bill required the USDA to put in place, would give growers more time to fix problems before their contracts are canceled, require processing companies to give growers more notice before suspending delivery of birds to their farms and prohibit companies from retaliating against growers who speak out against their contracts.

Proposals also would prevent growers from being forced to make expensive upgrades on their poultry houses without protections to safeguard those investments. And they would limit the ability of processors to cancel contracts when growers made big investments to get a contract.

The changes couldn't come soon enough for many in the industry, said Mike Weaver, president of the Contract Poultry Growers Association of the Virginias.

"Things have changed drastically as small mom-and-pop poultry operators and farmers' co-ops around the country have been bought up by Tyson, Pilgrim's Pride and other megacorporations," said Weaver, who said the top four companies — Tyson, Pilgrim's Pride, Perdue and Sanderson Farms — control 60 percent of U.S. chicken production.

"They've changed the rules in their favor," he said. "Once they took over, they started making their own rules. We got in a position of 'You either do this, or you're not going to get chickens anymore.' The growers are sick of it."

But a trade group that represents the chicken companies and will be working to shape the new regulations argues that the existing system works to the mutual benefit of growers and production companies.

"They need each other," said Richard Lobb, a spokesman for the Washington-based National Chicken Council. "The companies wouldn't be able to produce chickens or would have to produce them themselves if they didn't have the contract growers, and the contract growers would have to take all the market risks if they didn't have" processors.

Under the contract system, the processors own the hatcheries and the chickens, which they deliver to growers a flock at a time to be grown for up to seven weeks. Farmers are paid on the basis of weight gained by the flock.

Proposed changes could inject a new level of uncertainty and upset the balance in that system, Lobb said. He said most growers accept the system and are willing to work with the companies.

"The current system has been working quite well for both Perdue and the more than 2,200 independent farms we now have who are raising poultry for Perdue, and many have been growing for Perdue for many generations," said Luis A. Luna, the company's vice president of corporate communications. "They produce a product for which they have a guaranteed customer."

He said the contracts are flock to flock, as opposed to multiyear, leaving the farmer with options, and he said the company gives a farmer plenty of time to make changes if production levels fall. He noted that the industry has struggled with losses over the past two years amid the recession and, "had it not been for the poultry contracts, very few independent family farmers would have survived that downturn."

The company requires upgrades such as those to Morison's chicken houses to stay competitive. "If you reinvest, you remain competitive, if you don't, you fall behind," he said. "Perdue is up-front about that with farm families. … You can't stand still."

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