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Hatching hope for farmers : the new pecking order

Baltimore Sun Staff

AS HE TRUDGED through the mud of poultry grower Arthur Holley's Parsonsburg farm last week, Rep. Wayne T. Gil-chrest symbolically crossed into new territory. He and several other members of Congress had journeyed from Washington to take a closer look at something that until recently had gone largely unnoticed -- the demotion of the chicken farmer from ruler of his roost to land-owning serf.

In doing so, Gilchrest, a Republican who represents the Eastern Shore, and the others joined a small but growing movement that hopes to change the relationship between the roughly 30,000 U.S. chicken growers and the large corporations that process and market poultry.

Escorted by activists such as Episcopal priest Jim Lewis and his Delmarva Poultry Justice Alliance, the representatives also got lessons in the woes of poultry factory workers, chicken catchers and immigrant labor, and a hint of assembly line sanitary practices that are anything but finger-lickin' good.

The latter problems have been well documented, but the chicken farmer's plight is just beginning to get attention:

* Since a three-part series of articles in The Sun three weeks ago described the farmers' predicament in detail, U.S. Department of Agriculture officials have asked Congress for more authority to help growers who have been wronged.

* Gilchrest's delegation pledged support.

* The formation of a cooperative of Eastern Shore growers as an alternative to large processing companies has moved closer to reality.

* And, state regulators who two years ago were targeting chicken farmers for their handling of manure are planning to shift some of the onus to the companies, holding them equally responsible for pollution.

In response, an industry that has historically been reluctant to talk much about its relationships with growers has indicated an openness to dialogue.

The Sun series told the stories of farmers who borrow hundreds of thousands of dollars to build chicken houses. In exchange for guaranteed prices for the chickens they raise, they must give up virtually all control of their operations.

It is the poultry firms that have the egg-to-supermarket stranglehold on authority, and government regulators have little power to help the farmers who are crushed along the way. The five largest poultry companies hold half the industry's market share -- an increasingly concentrated environment that has narrowed options for farmers seeking a better deal.

This system, known as "vertical integration," has produced many winners -- consumers who paid little for a low-fat meat and poultry kings such as Frank Perdue and Don Tyson who got rich and gave to community causes. Few people noticed when farmers began sinking to the bottom.

About the only attention they got was unwanted, as when environmentalists blamed them for the runoff of chicken manure that was polluting the Chesapeake Bay. Many were unaware that the farmers do not even own the chickens they raise.

A day after the Sun series concluded, USDA officials charged with policing the poultry industry's relationships with its growers acknowledged to a congressional panel that they do not have the enforcement authority or manpower to do their job well.

Michael V. Dunn, USDA's undersecretary of marketing and regulatory programs, asked Congress for authority to rein in errant poultry companies the same way they can get tough with the beef, lamb and hog industries.

Last week, Gilchrest, of Kennedyville, accompanied four House colleagues -- fellow Republican Amo Houghton of New York and Democrats John Lewis of Georgia, David E. Bonior of Michigan and Marcy Kaptur of Ohio -- to the Eastern Shore to hear the stories of the farmers and poultry workers. Members of the group later said they supported increasing USDA's authority over poultry and would determine what else they could do to help.

Other seedlings of new interest are sprouting. On Thursday the Chesapeake Bay Foundation secured the funding to start its own small poultry processing plant within about a year, hoping to supply it with chickens from a cooperative of about a dozen growers. The goal is to give the farmers, the plant workers and other members of the community an ownership stake in a production system that is fair and humane to all parties, and friendly to the environment.

In addition, poultry industry executives expressed a willingness last week to talk about the issues, meeting with the congressional visitors and inviting them to return to tour plants.

'Let's have dialogue'

"Let's have dialogue, not just cast accusations," Tom Moyers, Perdue's vice president for corporate affairs, said after the meeting.

Gilchrest, a self-styled citizen legislator familiar with the world of Eastern Shore farmers, has been an active participant in discussions of the environmental impact of poultry. But he acknowledged last week that he only recently became aware of how much control companies exert over their growers, and how little government help is available to farmers who try to fight back.

"This is the first day that members of Congress have been exposed to the industry as a whole," Gilchrest said, wearing a plaid shirt, cap and boots as he walked into Holley's chicken house. There, he asked Holley and grower David Barnes, a member of the Delmarva Contract Poultry Growers Association, to draw up a model contract that would give them more control over their fortunes.

"I think it's important that we as members have a strategy," Gilchrest said. "This is a labyrinth. We need to know things like: Is Tyson worse than Perdue? Is Perdue worse than Townsends [Inc.]? I think the integrators as a whole are struggling to stay economically viable in an international, competitive marketplace."

That's where the going gets tough. In making things better for farmers, regulators and lawmakers will feel plenty of pressure not to overburden an industry that, for all its wealth and power, works on slender profit margins. And that means recognizing that solutions favored by some growers could backfire if misapplied.

For example, Barnes told Gilchrest he might design a contract in which farmers were paid for their chickens by the square footage of the chicken house. That would be a radical departure from the current system, which pits farmers against each other in a paycheck competition: The ones who produce the heaviest chickens on the least amount of feed get the most money. But a farmer must trust the companies not to fudge the scorekeeping when they weigh the feed and the birds -- the two most crucial measurements of a farmer's performance. Past lawsuits have unearthed ample grounds for mistrust. Sometimes the cheating has hurt hundreds of farmers at a time. Sometimes it's been directed at a select, unfavored few.

Companies do pay some growers of pullets by the square foot, but those birds are raised to lay eggs, not to provide meat.

"One of the big desires on the part of some of these individuals or different groups is that we just take a pot of money every week and just divide it evenly," James A. Perdue, chairman of Perdue Farms in Salisbury, said in an interview. "Then the incentive is gone. The business is gone. We may as well, at that point, go ahead and buy land and build houses, because we're probably just as well off."

He's not the only one to say so. Tomislav Vukina, an extension economist at North Carolina State University who has studied poultry contracts, said every company would follow suit -- meaning growers who had built farms could be left with no chickens to raise.

"Once you eliminate the [competitive system], the people with the outdated facilities have no chance anymore," Vukina said. "It is, from an economic point of view, completely ridiculous. Something like that becomes a law, you will see a massive opening of company-owned farms."

Some argue that haggling over how to best divide the pie between growers is missing the point. The bigger problem, they say, is the size of the pie.

A raise of a penny a pound could double some growers' income, farmers estimate. Lee Schrader, a professor and leading poultry economist at Purdue University in Indiana, said that would increase the average family's annual chicken bill by a total of about $4.32 -- an amount that wouldn't keep people from eating chicken, Schrader said.

In recent interviews, poultry executives were lukewarm about the idea. They say companies have effectively raised pay by subsidizing technological advances that allow growers to tend more flocks each year. "Well, I'd love to pay them double what they're getting, if the consumer is willing to pay for that cost," said Perdue. "It's a very fine-tuned business."

Said Blake Lovette, the new president of ConAgra Poultry, the country's fifth-largest processor: "I'm sure everybody would like to have more money. We would like to have more money. Would consumers accept it? I don't know about that."

Growers also want laws passed to guarantee compensation for those who have production contracts canceled after investing hundreds of thousands of dollars building facilities to a company's specifications.

Minnesota passed such a law in 1990. A group of farmers is using the statute to sue Campbell Soup, which shut the doors on its chicken-processing plant in Worthington, Minn., two years ago after allegedly telling farmers that the company's broiler business would be there for generations to come. Recently, Campbell has been making payments to growers that it originally promised in its contracts; so, the company argues, it has met the law's requirements.

But the law has potential loopholes, and growers say the Minnesota statute has been invoked rarely. Minnesota's broiler industry isn't nearly so large as those of states such as Georgia or Arkansas, where chicken is a powerful economic engine.

As they wait for the outcome of their suit, however, the former Campbell growers in Minnesota have formed a cooperative to grow chickens for a kosher processor in nearby Postville, Iowa. Their "barns" -- as farmers tend to call poultry houses in these parts -- are filling again. The system of pay gives growers a sure amount set by the size of their barns, with bonuses for those who produce fat birds with less feed.

"We still get the benefit of being a good producer," said Jim Spangler of Morgan, Minn., a board member of the cooperative. "Everyone in the group agreed to stick together. They see that unity has a lot of value."

Co-ops may be answer

That's why people such as Michael Heller, the Chesapeake Bay Foundation agricultural expert, think grower cooperatives are the answer -- a way to give farmers alternatives to the dwindling number of large processors. "Legislation and regulation and lawsuits are powerful tools, but ultimately we've got to add to those tools economic enterprises that are going to solve the problem," Heller said.

But those enterprises require money and resolve. And they can fail. Just ask Bill Patrie of Bismarck, N.D., an expert on cooperatives who spent a year working with the Northern Plains Premium Beef Co-operative, which covered two Canadian provinces and five U.S. states -- and dissolved in September.

Gold Kist Inc., the country's second-largest poultry processor, is a cooperative -- which is not to say it lacks problems. Started as a farmer-owned cotton-ginning operation in 1933, the Atlanta-based cooperative grew into an agricultural giant that includes 2,200 poultry grower-members.

The cooperative status might have something to do with higher satisfaction among Gold Kist growers. A 1996 survey of Alabama farmers found that 67 percent rated the company as fair, compared with only 32 percent for Tyson, Gold Kist's largest competitor.

But Gold Kist runs itself pretty much like any other major poultry company, and its growers remain subject to the controls and constraints of contract farming.

Ask Mike Beatty, a Georgia farmer who says he spent hundreds of thousands of dollars to build and upgrade chicken houses for Gold Kist, only to have the company require him to convert his operation, at more cost, to grow a different type of bird.

Then, Beatty claims in a lawsuit, the company shut down half his farm.

His example shows that a remedy for the chicken growers' plight can't stop at finances. It must address who's boss.

Pub Date: 03/21/99

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