Farm Aid Applauds New Rule Bringing Transparency to Contract Poultry Industry

As a member of the Campaign for Contract Agriculture Reform (CCAR), Farm Aid applauds the finalization of the “Transparency in Poultry Grower Contracting and Tournaments” rule under the authority of the Packers and Stockyards Act. The poultry transparency rule announced today is the first of several rule changes Secretary of Agriculture Tom Vilsack has put forward to strengthen enforcement of the Packers and Stockyards Act.

Steve Etka, CCAR’s policy director, put it this way:

“The opaqueness of the contract poultry production system is at the heart of the economic abuse and deception inherent in the model. By requiring poultry companies to be more honest and business-like with prospective and existing poultry growers, this rule helps to deter that deception and give farmers the information they need to make wise investment decisions. Without a doubt, a full-scale reform of the poultry payment system is needed, but this rule is a very important and welcomed step toward that goal.”

Large poultry companies require contract poultry growers to go deep into debt and take on heavy liabilities to supply our nation with chicken. Contract growers receive no guarantee of return on their investment, no clarity on how they will be paid for their services, and no transparency about the quality of inputs the company provides to them to do their jobs.

Contract poultry growers are paid using a “tournament system” that bases payments on a grower’s success in putting weight on the birds they are raising during the 6-to-8-week “growout” period, relative to other growers. But the main factors that determine the grower’s ability to put weight on the birds are inputs provided and controlled by the poultry company—these factors are totally out of the control of the grower. These inputs can vary greatly in quality, leading to extreme variability in a grower’s income from flock to flock, through no fault of their own.

Since its inception in 1999, CCAR has sounded the alarm about how the combined effects of agribusiness consolidation and vertical integration have diminished farmers’ opportunities in the marketplace and endangered the economic vitality of rural communities. The contract poultry production model is one of the first examples of vertical integration in agriculture. CCAR has worked to combat the economic abuses faced by poultry growers and to alert all farmers about the dangers of relinquishing their independence through contract production.

“The lack of transparency for prospective contract growers about what to expect if they sign a contract to grow chickens for a poultry company has unfairly encouraged many farmers to go deep into debt to build specialized chicken houses on their farms, based on inflated income expectations,” said Etka. “For existing growers who have already signed a contract, the lack of transparency about the quality of the inputs supplied to them relative to other growers, and how those inputs will dictate their pay, enables companies to quietly shift their economic risks onto growers’ spreadsheets and retaliate against unfavored growers.”

This rule is the first of several Packers and Stockyards Act rules put forward by USDA to promote transparency, address deception and discrimination, and support market competition and fairness in the livestock and poultry sectors.

The Campaign for Contract Agriculture Reform (CCAR) is a national alliance of organizations working to provide a voice for farmers and ranchers involved in contract agriculture, as well as the communities in which they live. CCAR advocates for bringing equity to the contract negotiating process and against the exploitation of farmers, ranchers, and poultry growers in the meat and poultry industry.