How poultry companies concentrate wealth and pit farmers against each other in a secretive tournament pay system.
Roger Ballen, Conversation, 2003. Image courtesy Roger Ballen
This is the architecture of the new meat empire: row upon row of immense, identical barns lined up neatly on the top of a hillside. Each has giant fans on one end for ventilation, and twin silver feed silos rising up from the other. In a small room near the door, computers control the watering lines, feeding trays, and airflow systems. The interior is a dim cavern, and the air is noxious with the burn of ammonia fumes. Twenty-five thousand chickens cover the floor, a moiling white carpet of movement that clucks and squawks and quickly spreads apart when people walk inside.
In towns like Waldron, Arkansas, a network of these factory farms supplies a central Tyson Foods plant, which can produce millions of pounds of chicken a week, cranking out truckloads of prepared products like chicken tenders, boneless breasts, and wings. As recently as the 1980s, when the meat industry was still defined by individual sovereignty, open markets, diffuse ownership, and decentralized decision-making, Waldron was a pillar of the rural economy. Today, it’s more like a far-flung imperial outpost. Stores along Main Street are boarded up or just barely scraping by; on a Saturday night, the strip can look like a canyon. Most of Waldron’s 3,600 residents are tied to the plant, and the economic suffocation seems at odds with the steady fountain of cash Tyson generates. But that’s how empires work: control is centralized, wealth is concentrated, open markets are replaced by fiat, and independent business owners become indentured servants.
Fueled by America’s insatiable desire for meat that can be easily ordered from a dollar menu and conveniently eaten while driving—the hidden economic system that created the Chicken McNugget—a few companies figured out how to raise animals as if they were widgets in a factory line. In a process called “vertical integration,” the companies hatch the baby chicks, pay the farmers to raise them, then pick the animals up again, slaughter the birds, and ship them to restaurants and stores. The industrialization of the meat system began with chickens, but it didn’t end there. Whereas an entrepreneurial young woman from Iowa used to be able to borrow some money, raise some hogs, and sell them on the open market, animals are now largely raised under contract for the handful of companies that dominate the market: Tyson, JBS SA, Cargill, and Smithfield Foods. If you’re an entrepreneur in a town like Waldron, you must sign a contract with Tyson or one of its few competitors to get into business.
Never in US history have so few companies held so much control over the meat industry. One hundred years ago, five meatpackers controlled between 75 percent and 82 percent of the market, prompting a wave of antitrust reforms that effectively broke up the meat cartels of old. By the 1960s, the top four beef packers controlled less than 30 percent of the market. But the lessons of the trust-busting era were eventually forgotten, and beginning in the ’80s a new way of thinking took hold. Federal regulators determined that the structure of the industry didn’t matter as much as the final price of the product; in other words, it was fine to consolidate as long as the companies could prove they were selling the final product for less. The big meat companies went on a merger-and-acquisition spree, buying up competitors while arguing that massive consolidation was the best path toward cheap meat.
There may be a rainbow of brand names down the aisle, but if just two companies decide to adopt a practice, it will apply to 40 percent of chicken meat in the US.
Today, three companies control nearly 50 percent of the poultry market, four control 66 percent of the pork market, and four control 83 percent of the beef market. The consolidation makes it tough for shoppers to vote with their dollars. There may be a rainbow of brand names down the aisle, but if just two companies—say Tyson and Pilgrim’s Pride—decide to adopt a company-wide practice, it will apply to 40 percent of chicken meat in the US. For consumers, these practices are often opaque. While 95 percent of Americans eat meat and poultry, few have heard of a chemical called peracetic acid, for instance, used to douse chicken carcasses as they go down the line at the slaughterhouse. The chemical bath is necessary because the birds live in a crowded barn on top of their own feces, and pathogens can follow them into the processing plant.
Consumers lack information regarding the volume of peracetic acid used, and its cross-use with other chemicals. Nevertheless, it’s standard industry practice due to the decision of just a few firms. According to a 2013 Washington Post investigation, poultry companies are using chemicals like peracetic acid in greater volumes as they ramp up production at plants. When people are exposed to peracetic acid for long enough, it can burn their eyes and skin and damage internal organs. The Post found that USDA safety inspectors and poultry company workers at slaughterhouses were suffering from a long list of problems that they attributed to being exposed to the disinfectant chemicals, such as burns, irritated eyes, rashes, and respiratory problems like asthma.
Some of the harshest effects of this centralized control are felt at the farm level, and there’s no better way to understand this than to examine the secretive system that companies like Tyson use to pay chicken farmers, which consolidates information and power in Tyson’s hands and pits farmers and communities against one another to earn a living. Appropriately, most people forced to live within this financial arrangement call it simply “the tournament.” For the belt of America’s poultry farms, which stretches from deep Southern states like Georgia, Alabama, and Mississippi to Missouri and Indiana in the lower Midwest, the tournament has become the primary market system.
Greg Owens and Richard Moore, poultry farmers outside of Waldron, are among the countless farmers the tournament has driven out of business. Owens is a bear of a guy with the thick beard of a homesteader, while Moore looks the part of a gentleman farmer, thin with a square jaw and a quiet demeanor. Having raised chickens for Tyson for years, both men are essentially high-tech sharecroppers. Contract farmers must borrow as much as $2 million to build a modern set of chicken houses, then sign a contract with the “Integrator,” as the chicken company is called in the business. The Integrator, Tyson in this case, will deliver birds to the farm, but the farmer will never own the animals. Instead, farmers will raise them under Tyson’s specifications, and the company will deliver feed, send field veterinarians to check on the animals, and prescribe drugs as needed.
This allows poultry companies to carry out practices even regulators might be unaware of. A Reuters investigation published in September 2014 found that five poultry companies—including Tyson, Pilgrim’s Pride, and Perdue Farms—routinely medicated their flocks of chickens with antibiotics, even when the birds weren’t sick. The drugs were administered in the kind of dangerously low doses that are particularly likely to give rise to antibiotic-resistant “superbugs.” A former FDA commissioner called the drug use “astonishing” when Reuters shared its reporting with him. The only reason Reuters discovered the massive drug use was because its reporters combed over the “feed tickets” that the poultry companies gave to farmers and carefully tabulated all the antibiotics that were listed as being included in the food. Using the drugs on farm animals is legal, but the government doesn’t monitor how long the drugs are used, how large the doses are, or for what purpose the companies use them, according to Reuters.
As the factory farm system has grown, farmers say they’ve seen the health of the birds decline. They are bred to grow so quickly that their breast meat can turn gelatinous, and they sometimes keel over dead from heart attacks. If the ventilation systems fail, birds can start dying within minutes. Sickness is not uncommon, and farmers keep an eye out for highly contagious ailments like avian reticuloendotheliosis or Marek’s disease, cancer-like diseases that can wipe out whole flocks.
Still, contract farming has its appeal: farmers are guaranteed a steady and predictable supply of birds, and don’t need to hatch them or find a market in which to sell them. One of the farmer’s primary jobs is to walk through the barns and collect the chickens that die, throwing them into a refrigerated container outside (the Integrator sends a truck to pick up the dead birds and disposes of the carcasses off the farm). After six weeks’ time, Tyson will arrive to claim its fattened birds and take them off to slaughter.
Because poultry companies own the birds, farmers aren’t paid a price per pound. Instead, companies like Tyson keep a tally of the farmers who deliver chickens to slaughter. Based on how well they fattened the birds on a given ration of feed, the farmers are ranked against each other. At the end of a given week, Tyson will mail out tournament results to all the farmers whose birds were processed. Farmers will learn how they ranked, how many players were in the tournament, and how much weight their birds gained on their feed rations. Those at the top receive premium payment, while those at the bottom are financially penalized.
The financial windfall of the winners is taken from the pay of the losers. This means the tournament systematically pits farmers against each other.
But critical information is withheld. Farmers don’t know whom they have competed against, and sharing information with neighbors constitutes a breach of contract: the rankings are confidential, proprietary information of the Integrator. What each farmer does know is that his gain is his neighbor’s loss. Critically, the tournament is a zero-sum game: the financial windfall of the winners is taken from the pay of the losers. This means the tournament systematically pits farmers against each other. The difference in pay between the winners and the losers can be the difference between making a profit on six weeks of work and taking a loss.
Poultry companies say the tournament incentivizes farmers to work hard, which might make sense if they had any control over their operations. But the success of a given flock of chickens rests on the quality of feed the birds eat, and the healthiness of the chicks when they’re delivered. A farmer can be a genius, can put in ten-hour days, seven days a week, but he will not raise a good batch if his feed is bad or he gets sickly chicks. His impact is on the margins: if he completely neglects his birds, they won’t gain as much weight. If he’s in the chicken houses constantly, they’ll gain a little more. Farmers pray for good birds and feed, and the tournament is laid bare as a lottery.
The tournament allows companies to leverage new farmers against old, as those around Waldron have discovered. Until about 2008, Moore and Owens were performing relatively well in Tyson’s tournament. Then strange things began to happen. They kept conducting their business as usual, but fell further and further in the rankings. There were new entrants in the competition, drawn by the promise of making a stable living on the farm. The change was noticeable on the signs outside the chicken farms that displayed the names of the farm owners. Signs bearing names like Forrest, Kelly, and Yandell were replaced by ones bearing names like Phouthavong, Sengkhamyong, and Vongsyprasom.
A few years before Moore and Owens started to fall in the tournament rankings, two Laotian men sat on a couch about a dozen miles north of Waldron, watching Thai kickboxing on television. They stared laconically at the screen as muscular young fighters delivered bone-rattling blows to one another, circling the ring. It was a sunny Saturday morning, and they were in the rundown farmhouse of Khammanh and Vieng Vongsady. The house was crowded, though it was still early, and the cars and trucks of about a dozen Laotian men and women were parked on the grass, as if a party were underway. Everyone wore work clothes and heavy boots and carried white paper face masks.
Inside, the kitchen was pungent with the smell of cooked fish and rice and a spread of food was laid out on the table. As more neighbors arrived, they picked at the buffet and filled their plates, milling on the porch amid loud and energetic conversation. Like many of the farmhouses around Waldron, the Vongsady’s home was adorned with fake flowers and jars of herbs. Photos of family members hung from the walls, staring down at the festivities. It was a Laotian décor, layered upon the aging architecture of an Arkansas farmstead.
The people craned their heads when they heard the semi-truck coming. It turned off the highway and began rumbling down the long dirt road to the house. As the truck got closer, the group stacked their plates in the kitchen and started filing out of the house, walking across the grass toward the Vongsady’s chicken houses. The big barns sat empty, with their doors wide open and beds of fresh litter waiting inside.
The Laotian farms being built and renovated across the South were paid for with money pooled together by dozens of families in Minneapolis, Wisconsin, and Illinois.
The semi-truck pulled alongside the open barn, and the driver, armed with a clipboard and paper, spoke with the Vongsadys and then gave the “okay” signal. The group of Laotians began unloading crates of young chicks off the back of the truck, walking down the length of the barn and dumping the birds on the litter. They worked soundlessly, handing crates of birds to each other in a steady relay. The sinew that held the growing network of Laotian farms together was more than a commitment to help on each other’s farms; many Laotian immigrants had gathered the money for their down payments by tapping an informal credit system, borrowing cash from friends, relatives, and neighbors in the community. The Laotian farms being built and renovated across the South were paid for with money pooled together by dozens of families in Minneapolis, Wisconsin, and Illinois.
Because many of them were getting into the business for the first time, they bought farms that were state of the art and which could outcompete local farmers in the tournament. One couple, Nouk and Nue Yang, for example, borrowed nearly $2 million to build a complex of seven giant chicken houses outside Waldron. These farms were outfitted with the kind of automatic ventilation systems and computer-controlled feeding lines that could make their operations more efficient.
The Laotians who bought older farms were able to get by in large part thanks to the free labor of their neighbors. At the Vongsady farm, the neighbors unloaded the baby chicks while the company truck driver stood by and watched, looking amused. Tyson often paid truck drivers to unload the trucks. In some cases, local farmers hired crews to do the job. Both of those methods added significant cost to the farming process. By unloading the birds themselves, the Laotian farmers kept their overhead low. Many slept on thin mattresses on the floor and cooked with wood-burning ovens, arrangements that almost made the economics of chicken farming workable.
A quiet tension grew between the Laotians and the local farmers against whom they competed in the tournament. The language barrier didn’t help. Wild rumors grew in both camps. The Laotians were convinced that the local farmers got sweetheart deals from Tyson. They thought the farmers must be related by blood to many Tyson employees, and that this gave them an inside line to the company’s management. The local farmers, for their part, seemed certain the Laotians were getting some kind of subsidized government loans.
In fact, both groups were simply trying to make a living under the same grinding rules of the tournament. What the Laotians discovered over the years was that the tournament system is not built to create winners. The system is structured to give an edge to newer farms. Houses that have tighter insulation and better equipment have an advantage over older houses that have been beaten up over the years. As newer houses enter the tournament, they drive down the pay of existing farmers, forcing them to either borrow more money and upgrade their facilities or get out of the business altogether. The Laotian farmers were no more immune to this than the local farmers whose operations they took over. Just years after they moved to Arkansas, waves of Laotians declared bankruptcy and left their farms, only to have them taken over by arriving groups.
Richard Moore never recovered his high position in the tournament rankings. He scored toward the bottom time and again until finally he was put on probation and told his contract would be cancelled. He put his farm up for sale, hoping to avoid foreclosure. The only willing buyer knew he was in desperate straits, and offered a rock-bottom price. So Moore and his wife left their big, white house with the broad porch facing Highway 248 and relocated to Springfield, Arkansas, where they moved into a small stone house on their daughter’s property.
Owens scored so low that Tyson eventually cancelled his contract too, putting him out of business. He got a job on the county road crew to pay off the debt remaining on his chicken houses.
Chicken farmers are in no position to change the meat industry. They know the companies hold power over them, and are loathe to push back. It seems that the same dynamics hold true in Washington, where lawmakers are working hand in hand with the nation’s biggest meatpackers.
On April 30th, the US House of Representatives held a public hearing to investigate the health of the nation’s meat industry. The hearing was advertised beforehand and streamed live over the Internet. What wasn’t advertised or broadcast was the party the night before.
Representatives went through a kind of Kabuki act, questioning the meat lobbyists and company representatives sitting in front of them in a way that seemed clumsily scripted.
The Agriculture Committee hearing room is located in a building across the street from the Capitol, and a balcony off one side has a wonderful view of the dome and the Washington Mall beyond. On the evening of April 29th, this is where one of the nation’s biggest meat lobbying groups threw a party for members of the House Committee. Appropriately, the North American Meat Association decided to have a barbecue. The group moved a large buffet table into the middle of the hearing room and heaped it high with brisket, macaroni, and other makings of a classic feast. There was an open bar nearby, and the room was packed and noisy. Lobbyists and congressional staffers filled their plates and grabbed their drinks and mingled on the balcony. At the end of the night, the buffet table and bar were removed, the floor was cleaned up, and the furniture was arranged for the next day’s event.
The congressional hearing itself was less interesting than the party. Representatives went through a kind of Kabuki act, questioning the meat lobbyists and company representatives sitting in front of them in a way that seemed clumsily scripted. No one seemed interested in asking about monopolies, tournament systems, or competition. They wanted to know, again, how much the meat industry was being hurt by the federal mandate to produce ethanol. And just how much, again, did the industry detest a new rule that would require them to label meat imported from overseas as such?
The hearing was emblematic of the modern system’s political power. Consolidation of the meat industry has occurred with bipartisan support over the decades, as Democratic and Republican administrations traded places in Washington. It seemed that there might be a break in this pattern with the election of Barack Obama. The economic malaise of rural America caught his attention while he campaigned for president in 2007 and 2008, as he spent months in Iowa and neighboring states. After his election, Obama named Iowa’s Governor Tom Vilsack to the post of secretary of agriculture, and told Vilsack to do something about the concentration of power among a few giant agribusiness companies.
Unlike a parade of agriculture secretaries before him, Vilsack actually took up the challenge. The US Department of Agriculture proposed the toughest antitrust rules over meat companies since the Great Depression. It has held a series of workshops with the US Department of Justice, with Vilsack and Attorney General Eric Holder (who has announced that he is stepping down from his position) traveling to places like Normal, Alabama, and Ankeny, Iowa, to learn more about Tyson’s power. The workshops were the biggest effort in decades to find a legislative prescription for the highly concentrated corporate power over the US food supply. Meat prices had been rising steadily since 2006, largely because the cost of feed grain had risen so steeply. But there was growing evidence that prices might be higher because of a lack of competition. Operating profit margins for the country’s top four meat companies doubled between 2008 and 2009, even as consumers cut back spending sharply, according to USDA data. Those companies then more than doubled their profit margins again between 2009 and 2010 to 4.5 percent. Prices were climbing, demand was falling, and profit margins were getting fatter.
In retrospect, the Obama administration seems almost naïve in the way it attempted to reform the meat industry. The workshops were launched with soaring rhetoric about the creation of a new food system and rural economy. What the administration did not anticipate was the organized resistance it would face from the multinational meat corporations that saw their business model challenged. Groups like the American Meat Institute and the National Chicken Council began working members of Congress, describing the proposed antitrust reforms as a job-killing act of regulatory overreach that would send the meat industry back to the dark ages. Many of the reforms were actually incremental in nature: they would have replaced the tournament system with a bonus-based incentive system that many hog farmers used and which lessened the risk of bankruptcy. Other reforms were stronger—for instance, giving the farmers greater leeway to sue companies like Tyson for unfair and deceptive practices under a 1920s-era antitrust law.
To summon opposition to these reforms, meat industry lobbyists stoked a “grassroots” movement of ordinary people who contacted lawmakers to voice complaints and make suggestions that perfectly mirrored the wishes of big business. There was, of course, no more effective group to enlist than farmers themselves. The National Chicken Council sent out a confidential memo in 2010 to big poultry companies, urging them to contact their farmers and ask them to oppose the USDA reform efforts by sending comments to the agency.
Congress helped build pressure on Vilsack to back off his reform efforts, and eventually he did. By late 2011, he was extolling the role that agriculture played in the American economy by providing jobs and exports. By 2014, the meat industry lobbyists seemed comfortable enough at their barbecue in the Agriculture Committee hearing room. The meat companies they represented, the empire of money behind them, were arguably more powerful because of the failed reform efforts. Talk of antitrust reforms had been safely moved to the fringes of the conversation.
The path is clear for companies to announce major new mergers and buyouts that will only expand their market power, as Tyson Foods did with its acquisition of Hillshire Brands. And as the competition dies away, farmers have an increasingly difficult time bargaining with the few remaining companies in control. Firms like Tyson will become even better at intimidating entrepreneurs in rural America, encouraging farmers to lobby on behalf of big companies, as many of them did in 2010 and 2011. For anyone who eats meat, the amount of choice is shrinking.
The market is unwilling to correct itself and legislators are unwilling to force it. In the meantime, the meat empire’s tournament system will keep on chewing through livestock, competition, and independent farmers.
Christopher Leonard is the author of The Meat Racket: The Secret Takeover of America’s Food Business. The former national agribusiness reporter for the Associated Press, his work has appeared in Fortune, Bloomberg Businessweek, Slate, The New Republic, and the New York Times. He is a Schmidt Family Foundation Fellow with the New America Foundation, a nonpartisan public policy institute in Washington, DC. A graduate of the University of Missouri School of Journalism, he lives outside Washington, DC.
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