Litter & livelihoods

PRAIRIE GROVE - Infused with the smell of ammonia and a tinge of rotten molasses, these clods of poultry litter are peppered with yellow bits of rice hulls, mangled chicken feathers and dried granules of bird dung.

Each chunk contributes to a pile some 8 feet high in this rustic shed on Jerry Hunton's farm seven miles south of Prairie Grove.

These hundred tons of poultry litter "de-cake," scraped out of the chicken barns after each flock, can be used instead of expensive fertilizer on cow pastures. Using litter as free fertilizer is a major component in helping poultry farmers eke out a living, and they can also sell it to other farmers.

But piles like this are the focus of a lawsuit against the poultry industry in Northwest Arkansas. In 2005, Oklahoma Attorney General Drew Edmondson sued Tyson Foods Inc., Simmons Foods Inc., Peterson Farms, George's Inc. and other poultry companies with contracts in the Illinois River watershed. His lawsuit in U.S. District Court for the Northern District of Oklahoma claims the company's growers severely polluted the river by spreading the litter.

If the lawsuit succeeds and prohibits the use of poultry litter on farms in this region, those relying on the financial benefit of free fertilizer to enrich hayfields and cow pastures could lose what makes their farms profitable.

But their biggest fear is that the processors named in the suit will go out of business or move production from the region, since finding another way to deal with poultry litter could drive up production costs.

That could devastate the poultry economy, a major contributor to Northwest Arkansas' financial health.

Hunton, who is a Washington County judge, worries about his livelihood if the court agrees with Edmondson, slaps the industry with major fines and stops farmers from spreading litter. His gloom is general across this region, as farmers, equipment dealers, chickenhouse cleaners, bankers and insurers realize how entwined their fates are with the outcome of this case.

"They are talking about destroying Northwest Arkansas. I don't know why people aren't talking about that," Hunton said. "They have to know the endgame is the destruction of Northwest Arkansas."

Edmondson's office declined to answer any questions about the lawsuit's economic effects on Northwest Arkansas for this story, but did point out some negative economic consequences that contamination in the Illinois River has had on eastern Oklahoma.

"Unfortunately, now is not the appropriate time to discuss the itemsyou want to explore, as they involve our trial strategy and damage assessment efforts," Edmondson's director of communications Charlie Price wrote in an e-mail.

Discovery and pre-trial motions are set to continue until January 2009, when the trial is scheduled to begin.

However, a recent motion by Cargill Inc., a defendant, asked the court to push the trial date back to summer 2010. The court has yet to rule on that and many other pending motions.

FARM COMMUNITIES Siloam Springs was a sleepy town of 3,300 people in 1952, but it had a relatively large poultry plant capable of processing 10,000 chickens a day.

In 1955, Bill Simmons, founder of Simmons Foods, bought out his partner in Pluss Poultry and began to expand the business. Today, Simmons Foods employs more than a thousand workers in and around the town.

Over the same period, Springdale-based Tyson Foods established itself as the pre-eminent poultry king of Northwest Arkansas, gobbling up competitors. Today, Tyson slaughters about 42 million chickens a week in plants across the country.

The growth of these and other companies led to thousands of poultry-growing contracts in Northwest Arkansas and eastern Oklahoma.

Farmers built chicken houses around Fayetteville, Springdale, Rogers, Siloam Springs, Prairie Grove and Gentry, which are near the Illinois Riverand its tributaries.

The Illinois River watershed - which extends from Rogers to Tahlequah, Okla., south to Lake Tenkiller, Okla., and includes portions of southwest Washington County - had about 1,700 operating poultry houses in 2006. The chicken litter from these farms is used to fertilize hayfields and cow pastures, but rainfall runoff carries some of that litter into streams and creeks.

Price, the spokesman for the Oklahoma attorney general, said water districts in eastern Oklahoma have suffered from the contamination of the Illinois River, as arsenic, zinc, hormones and microbial pathogens have entered the river through "negligent waste management practices." Phosphorus - a chemical found in poultry litter and municipal waste - causes large plumes of algae in the rivers, which results in fewer tourism dollars, Price said. Marinas, canoe renters, convenience stores and hotels have suffered financially due to the excess algae, he said.

After 3 1 /2 years of negotiations with the poultry companies, Edmondson hired an aggressive and wealthy South Carolina law firm to sue poultry processors here and force a reduction in releases of phosphorus.

Because of the secrecy of negotiations, it isn't clear exactly what Edmondson is seeking. But the suit's financial scale was partially revealed in August 2006, when Janet Wilkerson, then-spokesman for the poultrycompanies, said Edmondson demanded $45 million just to continue talks, which broke down at that time.

ECONOMIC INTERDEPENDENCE

Until recently, Bev Saunders, a poultry farmer just west of the Oklahoma-Arkansas state line, was contracting with Simmons Foods. But in light of the lawsuit, she decided to link with the bigger Tyson, which she believes will weather any major settlement.

Though no Oklahoma businesses are named in the lawsuit, hundreds of farmers like Saunders stand to lose if the Arkansas-based poultry companies curtail production after a major decision against them.

"I probably love Oklahoma more than Oklahoma loves me right now," Saunders said. "We feel very betrayed."

Mark Simmons, the chairman of Simmons Foods and son of the founder who died in 1974, agreed that the Oklahoma lawsuit could adversely affect his business, which in 2006 slaughtered 2.9 million chickens a week and had total sales of $515 million, according to industry publication Watt Poultry USA.

"Relatively, we have a whole lot more to lose, because we are much smaller as a total company," Simmons said.

"[Edmondson] says that he doesn't want to hurt some old companies, but what he has done is threaten my entire livelihood, as well as [that of] the 4,300 people who work for Simmons Foods, and over 300 growers that work with us."

Small by comparison to Tyson, Simmons Foods still has a big economic effect on Siloam Springs, where it is the largest consumer of water and electricity.

David Cameron, the city's administrator, said 60 percent to 65 percent of the city's utility revenue - $11 million a year - comes from industry, "a large part of which is the Simmons plant located there."

About 14 miles north of Siloam Springs, Peterson Farms employs about 1,300 workers at its headquarters and plants in Decatur. It contracts with 171 farms with 624 chicken houses.

In 2006, Peterson registered $128 million in sales and produced 5.42 million pounds of ready-to-eat chicken weekly. Eight percent of the growers in the Illinois River watershed contract with Peterson, company officials said.

"The fate of the farmers is directly tied to the fate of the companies," said Scott McDaniel, a Tulsa lawyer who has represented Peterson Farms since 2001. "And if it is no longer economically feasible for the companies to operate, then they don't need the production and the farmers won'thave the contracts." Tyson officials declined to speculate about the impact of the lawsuit on their business, and George's Inc. officials did not return two phone calls to their headquarters in Springdale. In 2005, Tyson contracted with 54.5 percent of the poultry houses in the watershed, and George's had 14.4 percent, according to previous stories in the Arkansas Democrat-Gazette.

High energy and feed costs have already stressed many contract farmers' finances.

Since many are deep in debt, they have no choice but to continue raising chickens.

One way farmers defray costs is by using poultry litter to fertilize their fields, a cheap way to raise grass-fed cattle.

But that practice is being hampered by state laws requiring nutrient management plans in Oklahoma and Arkansas, and lawsuits designed to prohibit the practice.

"One of the key issues that's being ignored in the lawsuit is that poultry litter plays an integral part in the agronomic economy in this region," Mc-Daniel said. "So the effect of eliminating the utilization of poultry litter will have farreaching results."COLLATERAL ISSUES When farms fail - either because their contracts are reduced or the processors close down production - many other businesses suffer.

Mike Moss owns independent insurance agency Moss Insurance and Financial Group in Siloam Springs. He's concerned about the outcome of the suit, since 10 percent of the insurance policies he writes are aimed at protecting poultry houses.

"If poultry processors had to curtail their production, obviously that would reduce the number of poultry farmers that could make a sustainable living, [and affect] businesses that sell to the industry," Moss said.

While the poultry lawsuit hasn't had any noticeable effects so far in the financial field, it's a topic that comes up in meetings, one banker said.

"It's a risk. It's been a risk for a long time. It's a risk that we take into consideration when we are assessing our lending to the poultry industry," said Roger Holroyd, executive vice president and senior loan manager at Arvest Bank in Siloam Springs.

Other sectors of the poultryeconomy also have a lot to lose in the event of a major settlement.

Kendall Proctor, sales manager of 4-State Poultry Supply Inc. in Springdale, said he has already noticed a slowdown in building activity. 4-State adds water and ventilation systems to new poultry houses, and Proctor confirmed that 100 percent of its business comes from the poultry industry.

"The chicken companies are all taking a wait-and-see attitude, to see what happens over there," he said.

'GOOD FAITH' EFFORTS Like many interviewed for this story, Mark Simmons believes that the poultry companies, municipalities and growers have made good-faith efforts to reduce their release of phosphorus.

BMP's Inc., a poultry broker established by the poultry companies, has taken more than 120,000 tons of litter out of the watershed in its first two years of business.

Siloam Springs and Decatur have new wastewater facilities in the works - each costing millions of dollars - and farmers across the region have applied for nutrient surplus plans to regulate how much litter can be spread.

Earl Hunton, Jerry Hunton's son, spoke about their efforts to reduce phosphorous releases. According to the Huntons' nutrient plan, they can spread up to 2 tons per acre of litter on their pastures.

Each ton is worth between $2 and $5 sold to BMP's. But that doesn't put enough nitrogen in the ground and the Huntons have to supplement with commercial nitrogen fertilizer, at $300 a ton.

Brian Haggard, an associate professor in biological and agricultural engineering at the University of Arkansas at Fayetteville, said efforts by Rogers, Fayetteville and Springdale to reduce phosphorous levels in the effluent of their water treatment plants have shown results. Testing from 2002 to 2006, Haggard concluded there has been a substantial decrease in phosphorous concentrations.

According to Haggard's research, between August 2003 and August 2004, phosphorus concentrations at points in the Illinois River south of Siloam Springs decreased by 44 percent, and in Spring Creek, upstream of the Illinois, some concentrations declined by more than 60 percent.

Despite the decreases, phosphorus concentrations downstream of Springdale remained above Oklahoma's requirements, he wrote. Haggard says that he has no data on whether new farming measures and restrictions in the watershed are curbing phosphorous pollution.