Is Tyson Foods' Chicken Empire a 'Meat Racket'?

Post by Dan Charles, The Salt at NPR Food (2/19/2014)

Listen to the Story on Morning Edition

Christopher Leonard's new exposé on the chicken industry, The Meat Racket, doesn't devote much ink to the physical object on our plate, the chicken meat itself.

Instead, Leonard focuses on the economic machinery that delivers the meat to us, or, as he puts it, "the hidden power structure that has quietly reshaped U.S. rural economies while gaining unprecedented control over the nation's meat supply." His book aims a spotlight at Tyson Foods, which helped create the modern chicken industry. And it recounts the stories of people, mostly farmers, whom Leonard contends Tyson has chewed up and cast aside since its incorporation in 1947.

Leonard, now a fellow at the New America Foundation, once worked for the Arkansas Democrat-Gazette, covering business news in Tyson's home territory. And there's a note of admiration in Leonard's description of Don Tyson, the man who drove the company's rise to global superpower of meat after taking over the company when his father, John, died in 1967.

"I think he was a genius," Leonard tells NPR's Renée Montagne on Morning Edition. "Don Tyson had the ability to see the world as it did not yet exist. He saw that chicken would soon replace beef or pork as the most popular meat in the United States." (For more, listen to the entire interview.)

Leonard has no admiration at all, though, for the system of chicken production that Tyson built, which "keeps farmers in a state of indebted servitude, living like modern-day sharecroppers on the ragged edge of bankruptcy."

Leonard's criticisms are not new. Activist groups devoted to farmers' rights, such as Rural Advancement Foundation International and the Institute for Agricultural and Trade Policy, have been fighting against concentration in the poultry and meat-packing industries for many years. In the early days of the Obama administration, the Department of Agriculture and the Justice Department held public hearings on alleged abuses by companies that dominate the meat business. Just a few weeks ago, the Pew Charitable Trusts released its own critique of the broiler industry.

Leonard's book, however, is probably the most detailed account of the inner workings of Tyson, as well as the relationship between poultry companies and the not-so-independent farmers who actually raise the birds. That relationship is often called "contract farming." It was invented by the poultry industry, but is now gaining ground in the pork and beef industries, too.

In this system, the farmer owns the chicken houses, but the poultry companies are very much in control. They deliver the chicks on their own schedule — in fact, they aren't required to deliver any flocks at all. They supply the feed, and the feed additives.

Leonard depicts that relationship as something like a con game run by the companies for their own benefit. "Almost invariably, from everything I've seen, the farmer loses," he told Morning Edition. "The farmer takes the brunt of the volatility; the farmer swallows the worst of the losses when there is a problem with their chickens."

Leonard tells the stories of farmers who've fallen into bankruptcy, and implies that this outcome is almost inevitable. The National Chicken Council, an industry lobbying group, responded with two pages of quotes from poultry producers who stoutly defend the contract growing systems. It also pointed out that when grain prices spiked a few years ago, chicken companies ate huge losses, while contract farmers, who didn't have to pay directly for the feed, were protected.

Tyson, in a separate statement, said "we depend on [contract farmers] and want them to succeed. Some of them have been raising livestock and poultry for us for decades, and in some cases, for multiple generations."

The Meat Racket's description of the problems with contract farming is more convincing than its ideas for how to build a better, more equitable alternative. Leonard, for instance, endorses the modest reforms put in place in Iowa, which guarantee farmers certain rights, such as the right to share contract information. But those reforms don't touch the basic shape of the system.

His more ambitious hope is for a revival of free markets in meat production instead of vertically integrated supply chains run by big companies. Yet it's unclear whether this would really improve things. Competition among farmers is a brutal reality of commodity production; as farmers push to become more efficient, it drives down prices and pushes the weakest out of the business. In poultry, the companies run that competition; in many other commodities, free markets do the job.

Few American consumers seem to care very much about that. After all, if competition keeps prices low, why should they complain?

Leonard thinks the situation has changed, and that poultry superpowers now are using their power to raise chicken prices, squeezing consumers as well as farmers. Yet the industry's ability to protect its profits still seems limited. Five years ago, one of the biggest poultry companies in the country, Pilgrim's Pride, actually went bankrupt when feed prices soared.

Pilgrim's Pride was snapped up by JBS, a Brazil-based multinational. It's now the biggest producer of meat in the world, ahead of Tyson. Increasing concentration in the meat industry, once fueled by Don Tyson's ambition, continues even without him.

Tyson Responds

Read Tyson Foods' emailed statement to NPR responding to Christopher Leonard's observations.

"Contrary to critics like Mr. Leonard, we provide opportunities for farmers to prosper and consumers to buy safe, affordable food.

"Tyson Foods is one of the leading supporters of American farmers, paying more than $15 billion last year alone to the thousands of independent farmers who supply us. We depend on them and want them to succeed. Some of them have been raising livestock and poultry for us for decades, and in some cases, for multiple generations. They own and operate their own farms and either sell their livestock to us or raise our chickens for us.

"Our business is structured to meet the needs of our customers and ultimately consumers. We sell our products to retail and food service companies; however, we don't set consumer prices. What we ask for our products is determined by supply and demand. No one company is big enough to control the market, especially in today's global food environment. U.S. consumers still spend a smaller percentage of their total income on food than consumers in most other countries.

"Meat production is already one of the most heavily-regulated industries in the country with laws covering such important areas as food and worker safety, livestock price reporting and product labeling as well as rules governing our business relationship with the farmers. But for us, it's not just about regulations, it's about people trying to do the right thing in every aspect of what we do, including how we work with farmers."

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