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Poultry growers decry farm system

by Nathan Owens | July 17, 2019 at 2:00 a.m.

Poultry growers who claim they've been wronged by industry practices spoke out Tuesday about the contract grower system, hoping the government will amend rules meant to protect farmers from corporate bullying and other anticompetitive practices.

After 11 years of inaction, the U.S. Department of Agriculture plans to address the Packers and Stockyards Act of 1921 this summer and to have drafted changes ready for public comment by the fall.

The act was originally designed to ensure effective competition and integrity in livestock, meat and poultry markets. However, the language of the law is vague in parts, and it left room for conflicting interpretations to develop over time, said Sally Lee, associate director of Rural Advancement Foundation International-USA, a farming nonprofit in North Carolina.

"That has resulted in a weakening of protections for farmers from even practices such as retaliation," Lee said in an address to journalists and others in Washington, D.C.

With her Tuesday were farmers from rural areas across the South who traveled to tell their stories and raise awareness of the issues facing animal producers, particularly poultry growers.

"We are calling on USDA to listen to the farmers and to get the rules right," Lee said.

Now that a renewal of the USDA's Grain Inspection, Packers and Stockyards Administration rule is being considered, it is likely going to be challenged by livestock and poultry industry groups.

Resistance from industry groups to regulations proposed near the end of President Barack Obama's administration was based on concern about government intrusion in the market.

Under the current contract poultry system, the packers own almost every aspect of production -- the processing plants, the feed mills, the hatcheries, the chickens. Because the companies integrate all those aspects, they are often called integrators. But they don't own the farms.

The integrators offer contracts under which they agree to provide baby chicks, feed and medications to the farmer. Every 5-6 weeks the companies collect the full-grown chickens and haul them to processing plants.

The farmers compete with their neighbors under what's called a tournament system, where the companies rank each grower by how cost-effective they are in raising their birds. Those who rank at the bottom take a pay cut that is used to give a bonus to the top grower.

"The performance-based contract structure of modern poultry production was instinctively designed to put the well-being of the birds as the top priority, as incentives are given to farmers who raise the healthier birds, take risks and work hard. It incentivizes farmers to do their best, to compete, just like every other business in America or any other free market," National Chicken Council President Mike Brown said in a 2016 news release.

The problem with the system is that the farmers are dependent on the quality of chicks and feed provided by the companies, Lee said.

"You can imagine it's like running a race, but everyone is starting at different starting points, and someone may be starting ahead of you," she said.

The sliding pay scale can lead to a financial crisis for growers because many have to take on debt to enter the business. The average cost of a new chicken house is between $300,000 and up to $500,000, Lee said. Companies also often require growers to make costly upgrades to their houses. If they don't, a contract can be terminated.

"They often have to go over $1 million in debt," she said. They do this because they are sold a promise of being business partners with the companies and that the farm is a long-term investment.

"For many chicken farmers that dream never comes true," Lee said.

Tony Grigsby, a retired law enforcement officer of 29 years, was a chicken grower for the past 12 years in Boaz, Ala. He got into the business because his wife Christy's family had raised chickens for decades. But it became a problem for him and Christy soon after starting.

"Corporate bullying, intimidation, mafia-like mentality has taken control of this industry," Tony Grigsby said. With his investigative background, he started to document and question references of any wrongdoings and, he said, "it brought to light deceptive and unfair practices."

"The integrator is by far the most responsible party for whether or not you get a quality chicken or chick ... yet farmers are paid based on how well these chickens performed," he said. "When I started speaking up and asking questions, the company retaliated."

Grigsby and his wife began to receive fewer chicks from the company, and the chicks they received had "infections, vitamin deficiencies and literal physical deformities," he said. Then the feed quality got worse. At times it would show up too late and they couldn't feed their chicks on time.

They filed for bankruptcy protection in January.

"We need laws and regulations to protect the American farmer rather than the big corporations currently controlling this industry," Grigsby said. "Americans are literally drowning in the industry."

Carlton Sanders of Forest, Miss., said he was driven out of business for not upgrading his houses. He was a chicken grower for 28 years under a local, family-owned business.

Of the 173 growers under contract in Mississippi, he said he was the last black farmer.

But when a larger chicken processor took over, things began to change. In 2014, his integrator gave him a list of expensive renovations "that nobody else received," he said.

"They asked me to make $105,000 worth of upgrades, I borrowed another $93,000 to make some of these upgrades," he said. "I then owed $295,000, but I still made my payments on time."

The next year the company required ventilated chicken houses.

"I went to my bank to see about another loan," he said. "The work would cost $318,000 total. My banker told me not to apply for another loan and to consider selling my farm instead. Meanwhile, the company stopped giving me chickens to raise, but they did not tell me why, and I was still under contract."

Currently, the USDA is investigating Sanders' case but has taken no action. The bank has since foreclosed on his property, and Sanders has filed for bankruptcy to try to save his farm and home.

Business on 07/17/2019

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