Contract Poultry Farming

By Carole Morison

Virtually all  poultry raised in the United states is done so by family farmers under contract with corporate agribusiness in a system known as vertical integration.  Contract production is preferred by agribusiness giants as it reduces their capital cost to get the product to table.

Poultry companies are commonly called integrators.  Vertical integration is where the integrator controls every aspect of the operation from the embryo to the market shelf (the combining of production ,  processing , and distribution into a single entity).  Under contract poultry production, growers (poultry farmers) provide the land, buildings, equipment, utilities, and labor in raising the birds to a marketable age, while the companies supply the chickens, feed and medication.  The grower is also responsible for dead bird disposal and manure disposal.

This financial venture has become so profitable that the top five broiler companies now process more than 226 million pounds of poultry meat per week.  Studies by the National Contract Poultry Growers Association show that these companies enjoy a 20% to 30% return on their investment while the most contract poultry farmers can hope for is a 1% to 3% return despite the fact that the growers invest over 50% of the entire capital needed in the industry.  Studies by Louisiana Tech University and the National Contract Growers Institute (NCGI) revealed that over 71.6% of the nations poultry farmers earn a below poverty level income from their poultry operations and by USDA standards would qualify for food stamps if they weren’t to proud to ask.

A Delvarva study of poultry grower pay by NCGI covered a ten year time frame and revealed that average pay to poultry growers per chicken raised was 16 cents per bird.  In conclusion, growers are making the same amount of pay  per bird as they did 10 years ago.

Compared with traditional agricultural markets, vertical integration of poultry is unique in that with a few exceptions, most agricultural laws do not apply.  This is due primarily because companies retain ownership of chickens, feed and medications which disqualifies the grower from traditional federal disaster and farm programs.

The pay for a contract farmer is based on what growers call “artificial competition shrouded in secrecy.”  All inputs (chickens, feed, medication) to the farm which are used in the process of figuring grower pay are controlled by the companies.  Growers are basically paid on pounds of meat moved from the farm of which the inputs to the farm are deducted.  They have no control over the breed or condition of the chickens placed on the farm, the method or ingredients used in the formulation of the feed delivered to the farm or any medications which might be used on the farm.  In order for growers to be truly competitive, they would have to receive identical inputs which is virtually impossible.

Poultry production contracts are prepared by the poultry companies and offered to growers on a take it or leave it basis.  The contract is good for only one flock of chickens (6-10 weeks) and can be changed at any time if the company so desires.  Once the grower has invested in poultry houses, they have no choice but to sign the contract.  If they do not sign the contract, the company will not place chickens on their farms.  This results in the loss of the farm and the families home.  As poultry houses are single purpose buildings, the growers have no choice but to sign the contract or face bankruptcy.

In Alabama, 39 poultry growers refused to sign a new contract which included arbitration as a means of settling disputes.  These growers felt that their constitutional rights were being violated by being told they could no longer exercise the use of our judicial system.  As a result of their refusal they no longer have chickens on their farms.  Many of these growers have sought to sell their farms, and the sale has been blocked by the poultry company telling prospective buyers that they will never place chickens on the farm again.  June 24, 1996, the first notice of foreclosure was served to one of these Alabama growers, and will continue on a regular basis until all 39 farms have been foreclosed on.  One of these growers was the President of the National Contract Poultry Growers Association in 1996.

This is only one example of the absolute control poultry companies have over contract growers, and is nothing more than an updated version of indentured servitude.  Some poultry growers across the country, who have been active in trying to bring change in the poultry industry have either had their contracts terminated or conclude they are being financially ruined by manipulation of farm inputs by the companies.

When the chickens are ready for market, the companies send catching crews out to the farm to catch the chickens.  They are then sent to the processing plant, and the trucks carrying the chickens are weighed on the scales at the processing plant.  Several lawsuits across the country have been filed and some settled, for mis-weighing of chickens at processing plants.  Several lawsuits across the country have been filed and some settled for mis-weighing of  chickens.

The vertically integrated system evolved over 40 years and agribusiness giants view the poultry industry as a model for efficient and profitable food production.  This system is rapidly being adopted in other areas of our food production system.  According to Farm Aid, over 500 family farms are lost per day.  As the industrialization of agriculture expands, this trend will continue and at a more rapid pace.

 This is the plan the multi-nationals have for all of agriculture in the U.S.