Animal Ag

Op-ed: Monopolies Are Giving Chicken Farmers a Raw Deal. We’re Urging States to Act.

Published by
Patti Anderson and Mike Weaver

In the past few months, chicken prices have been climbing to record highs. The average price for boneless, skinless chicken breast has nearly doubled since last year (to $2.64 per pound). News reports have offered a growing list of reasons to help explain the rise, including inflation, supply chain challenges, labor shortages, the Russian invasion of Ukraine, and the current outbreak of highly pathogenic avian influenza or “bird flu.” However, these factors don’t fully explain why consumers are paying more at the grocery store. And it’s clear that those in the chicken business have seized on the current climate to drive their profits up.

Tyson Foods, the world’s second-largest meat processor, reported that its chicken prices rose 20 percent in the first quarter of 2022—while profits rose by a staggering 48 percent during that same time. And Tyson isn’t alone: The industry overall is reporting unusually high profits. Last quarter, Pilgrim’s Pride, owned by JBS, saw profits increase by 124 percent.

But while these companies and their shareholders profit, and consumers spend more on food, there’s another group that is often overlooked and underpaid: the farmers who raise chickens for these big companies under the contract farming model. They’re getting a raw deal.

The National Chicken Council—the trade association for chicken companies—reported that farmers’ pay per pound of chicken decreased 3 percent between 1990 and 2020 when adjusted for inflation. Chicken farmers we’ve talked to say they gross about 24 cents for each four-pound bird they raise. That paltry amount has to cover labor, maintenance, fuel, electricity, and other overhead costs. Several contract chicken farmers have gone so far as to sue large poultry producers citing unfair, predatory, and anti-competitive behavior. Last year, Tyson and Perdue agreed to a $35 million settlement to a lawsuit alleging that the companies have pushed farmers into debt and locked in their compensation at unprofitably low rates.

So, what’s really going on here? It boils down to the concentration of the chicken industry and its reliance on the contract farming model. Just four companies—JBS (Pilgrim’s Pride), Tyson, Perdue, and Sanderson Farms—comprise more than half the U.S. chicken market. This concentration of power has allowed the companies to squeeze both the farmers and consumers to maximize their profits.

Americans’ chicken consumption has been rising steadily, and the vast majority—95 percent—of chicken in the U.S. is produced through the contract model of farming. This means that farmers enter into agreements with companies that own flocks of breeding chickens, hatcheries, feed mills, and processing plants. The companies send the farmers chicks, feed, and medicine and the farmers raise the chickens for about six weeks until they are ready for slaughter. Then they deal with the massive quantity of waste left behind and start the cycle over.

The farmer is responsible for building and maintaining the chicken houses (to the companies’ specifications), which is an expensive endeavor: Constructing two new chicken houses runs about $1.5 million today. But the debts don’t end there—company-dictated upgrades often cost five or six figures and can be an unexpected and unwelcome burden for farmers. This has created an untenable situation for some farmers we know who are struggling to pay their mortgages and worried about losing their home and farm.

Unfortunately, this is not a new scenario—chicken farmers have been ringing the alarm bells on this debt treadmill for years. As a chicken farmer noted at a 2010 meeting with then-Attorney General Eric Holder, “Either I sign [the contract] or I ain’t got no chickens. Without any chickens, I can’t pay any bills. I can’t pay my mortgage because chicken houses are designed for one thing: grow chickens.”

While the contract system is sold to potential farmers as a way to reduce their own individual risks, the system also allows a few powerful companies to take advantage of farmers with low-paying contracts that farmers have little to no power to negotiate. In some cases, companies have threatened retaliation and punished farmers for speaking out by delaying shipments, delivering sickly chickens, and canceling their contracts with little or no advance warning. Fortunately, these issues have begun to garner more attention and action in the form of lawsuits and regulatory action.

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In addition to the $35 million settlement on chicken price fixing, a group of contract chicken farmers filed a class action lawsuit against Amick Farms last month in South Carolina. The suit alleges the plaintiffs were illegally classified as independent contractors when in reality, the company’s control over the business left them without legal protections, saddled with debt, and earning only a fraction of the minimum wage per hour worked.

The U.S. Department of Agriculture is also preparing new rules to better enforce the 100-year-old Packers and Stockyards Act, which is intended to protect farmers and ranchers from deceptive and monopolistic practices but has been inadequately enforced over the years, leading to greater market consolidation. This hurts chicken farmers because even if they start contracting with a different company, the terms are roughly the same.

And it doesn’t just impact producers in the chicken industry, either: Last week, Congress hosted hearings where several beef producers spoke out about the devastating impacts of consolidation. The issue even made it in to President Biden’s State of the Union address in January. “When corporations don’t have to compete, their profits go up, your prices go up, and small businesses and family farmers and ranchers go under,” he said.

While farmers and advocates await federal action, there are steps that states could take to help chicken farmers immediately. Today, the Johns Hopkins Center for a Livable Future sent letters to the attorneys general in the top 20 chicken-producing states, calling for them to provide transparency around chicken farmers’ contracts, protect their freedom to join associations, and investigate how the companies determine farmers’ pay (via the tournament system). These are simple reforms that contract chicken farmers have been requesting for years and that would help level the playing field and protect them from unfair corporate practices.

Consumers should ask for more from their state attorneys general and members of Congress. They can also vote with their fork by buying chicken directly from farmers or co-ops.

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The chicken industry likes to tout the efficiency of the contract system, but we’ve seen in recent years that highly integrated meat production is vulnerable to significant disruptions from pandemics, malware, weather, supply chains, and more. When market power is concentrated and companies don’t have to compete, those with less influence within the system can be exploited. As a society, we have much to gain from addressing anti-competitive corporate behavior and protecting the rights of chicken farmers. Doing so would reduce profiteering on the backs of consumers and enhance the resilience of our food system to withstand future disruptions.

It’s time we make meaningful changes toward a system that compensates farmers fairly and grapples with costs and benefits more holistically. State attorneys general have an important role and a duty to protect the public’s interest and investigate potential abuses of power. Investigating contract chicken farming is an important place to start.

Patti Anderson and Mike Weaver

Patti Anderson is the Senior Program Officer for Food System Policy at the Johns Hopkins Center for a Livable Future. She plays a central role in developing, implementing, and evaluating activities that engage the public health field in agriculture and food system policy at domestic and global levels.

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Published by
Patti Anderson and Mike Weaver

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