Down on the Farm: Modern Day Sharecroppers
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When Tom Greene agreed to grow chickens for ConAgra, Inc. 11 years ago, he thought it would be the fulfillment of a longtime fantasy to make his living working his own land. He and his wife, Ruth, had just bought the 90-acre farm they had dreamed about as a young couple 20 years before.
But these days, their four long, corrugated tin chicken houses are operated by somebody else. In January 1999, Greene, a former military public affairs officer, helplessly watched as his chicken farm went under the auctioneer's hammer because of a dispute with ConAgra.
Greene explains that he, along with 38 other farmers in Enterprise, Alabama objected when ConAgra demanded that they take out loans to invest in costly new equipment. They also balked at signing a contract that would forfeit their right to sue the company in the case of a disagreement.
Greene says he and his neighbors already had as much debt as they could manage. In order to get into the business, farmers must borrow a lot of money -- about $125,000 per chicken house -- to build facilities according to the poultry company's specifications. Since most chicken companies encourage growers to build four or more chicken houses, that represents an initial investment today of at least $500,000.
Like their heavily indebted counterparts throughout the industry, Greene and friends were not in a position to negotiate. That's because the chicken houses that they sunk their financial futures into have one purpose: to grow chickens. Without a steady supply of birds, farmers can't pay their mortgages. When Greene refused to change his mind, ConAgra terminated their business relationship, and he lost his farm.
Most chicken growers are reluctant to talk publicly for fear of reprisals, but many complain of predicaments like Greene's. They say the corporations that control the chicken industry hook new growers on the promise of making a good, steady income at home. Instead, growers find themselves trapped in debt-laden relationships that turn them into serfs at the mercy of the companies that make a fortune on their backs.
Nobody knows how many poultry growers have lost their contracts because only the companies have that information, says Mary Clouse, who runs the Contract Agriculture/Poultry Project at the Rural Advancement Foundation International (RAFI). Poultry companies say the number is very low.
Modern Day Sharecroppers
The way it works is that farmers provide the land, buildings, and their labor. The companies supply -- and retain ownership of -- the chickens, the feed, and any medicine the birds might need.
Growers are paid for growing the heaviest and healthiest birds on the least amount of feed in the six weeks they have the birds. The companies determine how well growers achieve those goals and pay them accordingly, using a complicated formula that ranks each grower's performance against the others who had birds picked up for processing that week.
But chicken growers say their performance is out of their hands, because they have no control over the quality and quantity of the birds, feed, and medicine they receive. They also claim the companies manipulate the ranking system to further erode their pay, a widespread allegation that the companies deny.
"There's no reason a company would discriminate or unnecessarily reward somebody for more than they deserve," says Bill Roenigk, vice president of the National Chicken Council, the industry's trade association in Washington, D.C. He adds that the ranking system is based on the same market-oriented, competitive model as the free market, because "those who work the hardest deserve to be paid the most."
However, several lawsuits have confirmed growers' claims that chicken companies, including ConAgra, have for years engaged in dirty tricks to cheat the farmers, such as delivering unhealthy birds, shortchanging growers on the quantity and quality of the feed, tinkering with the scales, and keeping the birds in hot parking lots for hours before they are weighed to make them drop weight.
How much of a difference can that make to a grower? According to Mary Fortenberry, a poultry grower in Pinola, Mississippi, the top pay and bottom pay scales can vary around $1,500 per batch of chickens -- up to $9,000 per flock on her six-house farm.
Between 1991 and 1995, poultry growers pocketed an average of $11,000 to $25,000 annually, according to a USDA survey. Data from Bill Heffernan, a rural sociologist at the University of Missouri who has studied contract poultry growers for more than 30 years, and Mary Clouse of RAFI, puts it at about $3,000 to $4,000 a year per chicken house -- a meager return. Heffernan says these figures don't include labor or other costs growers have to pay.
Farmers generally do well when they first sign up. But as their houses and equipment age, they find themselves losing ground to growers with newer facilities. After about five years, companies commonly require new equipment that can cost $50,000 per house. That adds, say, another $200,000 in debt to a farm with four chicken houses. Some critics claim the debt is a way to further entrench their dependence.
Over time, the contracts have become increasingly tilted to favor the companies. Since the farmers don't own the chickens, they can't sell them on the competitive market; the contracting company is their only potential source of payment.
The chicken contract is an MBA's dream: the suppliers' costs are more or less fixed, while farmers assume the risks -- disease, weather, and nature -- related to raising the birds. Some people refer to the farmers as animal babysitters. "They are merely company employees," Heffernan says, "but without benefits."
Many farmers used to do business on a handshake, but as corporate concentration increased, the business culture changed dramatically.
"It's like being a gerbil in a cage," says Rickey Gray, an assistant to Mississippi Agriculture Commissioner, Lester Spell, Jr. "The growers are going as fast as they can, but they're not getting anywhere. All in all, it's like a modern day sharecropping system."
A Problem of Consolidation
Over the last two decades, the poultry industry has gone from having a multitude of small, independent processors who competed for growers to one dominated by a handful of giant corporations, such as Tyson Foods, Gold Kist, Perdue Farms, Pilgrim's Pride and ConAgra. Heffernan, an expert on corporate concentration in agriculture, says the top four companies now control 55 percent of the market, with 30 percent belonging to Arkansas-based Tyson alone. A few dozen smaller companies share the rest.
Currently, companies operate on the Chesapeake Bay's Delmarva Peninsula and in pockets mainly throughout the South. Only one company typically operates in any 25-mile radius, Heffernan explains, further limiting the growers' options. Where there is more than one company in an area, he says, they observe an unwritten rule not to pick up growers who have worked for other companies. So once the farmers have signed with a particular company, they can consider themselves married to it.
Many farmers used to do business on a handshake, but as corporate concentration increased, the business culture changed dramatically. Without competition for the supply, Heffernan says individual growers have proved no match for the chicken companies who set the terms of the contract, almost always on a take-it-or-leave-it basis.
The poultry companies dispute these claims, saying that most complaints come from jealous growers who covet the additional pay of their harder-working neighbors. "The great bulk of the grumbling goes on from low-paid growers," says Michael McAlpin, president of the Mississippi Poultry Association, which represents the state's poultry companies.
So if the farmers get such a raw deal, why don't they revolt? Though the companies vigorously deny it, there is plenty of evidence that they retaliate against growers who dare to organize for fairer rules.
Take the case of Larry McKnight, a former chicken grower from Forest, Mississippi. McKnight, who happened to be president of the Mississippi Contract Poultry Growers Association, lost his contract in 1996 during the middle of an intense fight in the state legislature. The battle was over proposed legislation to give chicken growers basic rights like being present when their chickens were being weighed and letting their lawyer, accountant and spouse look over their contract. Poultry growers are normally forced to sign on the spot without any outside counsel.
"We had 150 to 200 growers showing up at the capitol every day lobbying for our bill," he says. "But when word got out that my contract had been terminated, the lobbying effort dwindled down to nothing, because they were absolutely scared they'd be next."
McKnight, 50, a soft-spoken, articulate man with a patient demeanor, grew chickens on two farms in central Mississippi for 17 years. He lost both and now works for the state.
Considering the force of the poultry companies' opposition, one might have thought the growers were trying to put them out of business. But according to the Mississippi agriculture department's Rickey Gray, the proposed legislation would merely have put into law what the companies had agreed to the year before.
"The fact that the companies fought so hard indicated that they had no intention of following what they originally agreed to," says Gray. "It showed really bad faith and confirmed a lot of the concerns the growers had been making us aware of."
Growers in Mississippi -- as in all poultry growing states -- remain without adequate protection from state laws against unfair practices by the companies.
Poultry companies, however, have had a much easier time at the state capitol. In 1995 they got legislation passed that prohibits the Mississippi agriculture department from getting involved in contractual arrangements between growers and the companies. According to Gray, similar legislation exists in Georgia, Alabama, Maryland, West Virginia, and Louisiana.
Mississippi chicken growers are battling a political and economic Goliath. With annual revenues of $4.5 billion, poultry is the state's largest agricultural commodity and accounts for 25 percent of Mississippi's economy. It also directly or indirectly employs one-fourth of the state's workers.
RAFI's Mary Clouse recognizes the industry's tremendous clout: "Those legislators are in an awful bind," she says. "If lawmakers do anything to anger the companies, they always threaten to move out of the state to, say, Utah where it's 'friendlier' than Mississippi."
Such race-to-the-bottom competition among states illustrates the need for effective federal regulation to protect farmers. As early as the 1930s, the U.S. Congress recognized that individual farmers could not match the power of large agricultural commodity buyers. It passed the Capper-Volstead Act to allow farmers to organize to negotiate price and terms of trade without violating the nation's antitrust laws.
So far, the laws on the books haven't helped poultry growers. The Grain Inspection, Packers and Stockyards Administration of the U.S. Department of Agriculture -- widely known as Packers and Stockyards -- has provisions that prevent poultry growers from being discriminated against, but growers and farm watchdog groups say they are ineffective and not enforced. Larry McKnight, the Mississippian who lost his farm, learned this when he lodged a complaint with Packers and Stockyards against Lady Forest Farms.
The Memphis branch office of Packers and Stockyards found that Lady Forest had no justification for terminating McKnight's contract and recommended immediate reinstatement. But the branch office's findings were inexplicably reversed in Washington, D.C.
Later, McKnight confronted James Baker, who directed the Washington office, while Baker was in Mississippi speaking at a farmers' meeting. "He admitted [his department] had dropped the ball in my case but said it didn't want to get bogged down in the legal process," McKnight recounts. "That's a strange thing for a watchdog agency to say."
A Packers and Stockyards spokesperson said the agency could not respond to McKnight's allegations at this time. But even if Packers and Stockyards did want to follow up, the most it can legally do is recommend that a grower be reinstated. Any actual enforcement would have to be pursued by the Department of Justice, adding years to the process.
McKnight later sued Lady Forest for violations of his rights under the Packers and Stockyards Act and the Agricultural Fair Practices Act. Although the company claimed he was terminated for poor performance, McKnight proved them wrong.
His victory, however, was bittersweet. While he got the satisfaction of knowing the courts recognized his grievance, punitive damages are not allowed under either law, and all he was awarded was $50,000 plus his attorney's fees. McKnight says he is still paying debts incurred by the loss of his poultry contracts.
Contracts of one kind or another have been used in various sectors in agriculture for years. The poultry industry, however, was the first to perfect this type of production contract, which gives the companies complete control over the product the growers produce.
Steve Etka, of the Campaign for Contract Agriculture Reform, says these one-sided contracts, known legally as "contracts of adhesion," are attracting increasing interest from other quarters in agriculture. "There are a lot of agribusiness sectors seeing the poultry model and the ability of the companies to shift risk and costs from themselves onto the grower," he says. "From a straight bottom-line standpoint, it looks pretty attractive."
There is also growing concern in the Midwest that production contracts will sweep through the giant corn, wheat and soybean sectors.
Already, similar provisions are creeping into hog and cattle contracts, says RAFI's Mary Clouse. In North Carolina, tobacco contracts jumped from 20 percent of the state's production in 2000 to 80 percent last year, and this year she expects them to be 100 percent. The same thing is happening in Kentucky, and Clouse says peanut production appears to be next.
There is also growing concern in the Midwest that production contracts will sweep through the giant corn, wheat and soybean sectors. In those cases, Heffernan says companies like Cargill, ConAgra and Archer Daniels Midland will own the seed and provide the inputs of fertilizer and chemicals required to grow the crop.
Just as the chicken growers don't own the birds, Heffernan predicts soybean and grain farmers won't have clear title to the crop. That means they won't be able to engage in the time-honored practice of using the crop as collateral on a loan, he says. Equally ominous is that like chicken growers, grain farmers won't know anything about the genetic background or even the identity of the material -- including the various fertilizers and pesticides -- they are putting on their land.
That will likely increase the difficulty citizens and communities have in dealing with the growing crisis of agricultural pollution, whether it is contamination from escaping genetically modified pollen, fertilizer runoff, pesticide spray drift, chemical tainting of groundwater, or the unfathomable quantities of bacteria-laden animal manure from cattle feedlots, hog operations and chicken farms that are fouling the land, air, and water throughout the nation.
In anticipation of the new wave in contract production, Iowa Attorney-General Tom Miller drafted legislation to protect producers -- a farmer's bill of rights, of sorts -- endorsed by attorneys general from 15 other states. Though the bill has been introduced into all corresponding state legislatures, none have passed it.
A version of the producers' bill of rights was introduced into both the U.S. House and Senate during debate on the Farm Bill. But the legislative session ended before finalizing the bill in 2001. The fight is expected to begin anew after January 23, 2002 when the Senate reconvenes.
Unless there's a speedy U-turn away from the government and economic policies that have fostered the enormous clout agribusiness corporations now have, only huge mega-farms operating under contract will survive predicts Fred Kirschenmann, director of the Leopold Center for Sustainable Agriculture at Iowa State University.
Concern used to be focused on the growing size and power of companies on the production side -- seed and chemical suppliers, food processing and manufacturing companies. But Kirschenmann and others say greater concentration in the retail sector is now driving this, as the food manufacturers attempt to match the power of their own rapidly consolidating product buyers.
"The business interests of these consolidated firms are clearly not going to be the environment, health, or rural communities," he says. "They are simply going to be getting the raw materials as cheaply and as efficiently as possible." To accomplish this, he sees a few very large industrial complexes that produce these materials dominating the American countryside.
As the wave of production contracts, which bring us ever closer to this vision, begins crashing through our food sector, Kirschenmann suggests we ask ourselves: "Is this what we want agriculture to look like in the future?"
Karen Charman is an investigative journalist specializing in agriculture, health and the environment.