New Film Exposes Unfairness and Risks in the Contract Farming System
Mike Weaver is a chicken farmer in West Virginia. He’s been raising poultry for a decade and a half and is the President of the Contract Poultry Growers Association of the Virginias. Weaver appears to be the quintessential chicken farmer and committed to the job. But, he says, “If I’d known 14 years ago what I know today, there’s no way I’d have bought a poultry farm.”
What he wishes he had known about the industry before he bought a farm is the subject of Under Contract: Farmers and the Fine Print, a new documentary exploring the hardships and hidden risks faced by the people who grow nearly all the chicken eaten in the US — risks that turn chicken growers into modern-day serfs. The film, which will premiere on February 1, 2017, in New York City, and will then be available online, is produced by Rural Advancement Foundation International (RAFI), a North Carolina-based nonprofit that has been advocating for contract chicken growers for nearly 25 years, and directed by filmmaker Marcello Cappellazzi and researcher Sally Lee, who works for RAFI.
The film features eight poultry growers and former growers in the South, looking at how their lives have been turned upside down by — as becomes clear through interviews with industry experts — standard practices of exploitation by poultry companies. Most families began growing chickens because they wanted a job where they could be home more with their children, to work for themselves or to have more say over their lives. Former chicken grower Paul Brown, of Mississippi, was a former builder and believed in hard work. “I thought, ‘What could I do that I could do myself and control my own destiny?’ I thought it was the chicken business.” It wasn’t.
Understanding the Contract Farming — and its Risks
That business has changed dramatically in the last 60 years. Chickens used to be a common sight on farms, but they were expensive to raise in large quantities for sale. This began to change in the 1940s, when formerly independent parts of the supply chain — hatcheries, feed mill, slaughter and processing facilities — began to be bought up and integrated into single companies, known as integrators. Owning the whole supply chain has allowed integrators to control price and quality, while the economies of scale they have achieved have made chicken the most consumed protein in the US. It has also reaped massive profits for the companies — in 2014, Tyson, the top poultry integrator, had earnings from its chicken business of $11 billion; Pilgrim’s Pride brought in $8.4 billion, and Perdue, $6.3 billion.
But while almost the entire supply chain is now under the control of the integrators, there is one link they have chosen not to own: the farms where the chickens are raised. In the early days of vertical integration, Tyson Foods, the pioneer of the model, realized that farming was the least profitable and most risky side of the business. Integrators instead contract with independent farmers to grow the birds, in an arrangement succinctly described by John Oliver in his 2015 segment on contract chicken farming on Last Week Tonight: “You [the farmer] own the property and the equipment, we [the company] own the chickens. That essentially means you own everything that costs money and we own everything that makes money.”
Ninety-seven percent of chicken in the US is grown under production contracts, which set terms for how the birds are raised, responsibilities and how the farmer is paid. In theory, contracts can benefit both parties by laying out clear terms and predictable payment; for poultry growers, life under contract is anything but beneficial. The tight control integrators retain over the supply chain businesses they own extends to the farms they contract with. Journalist Christopher Leonard, who has written extensively about the poultry industry, says, in the film, that the contract farming system “allows [the companies] to control the farm without actually owning it.” Control is largely exercised through debt: in 2011, contract growers’ total debt amounted to $5.2 billion. Two-thirds of contract growers have significant debt.
The Debt Cycle
Debt is a normal part of farming; farmers get loans to buy seed or equipment in the spring and expect to pay it off when they sell their harvest. Chicken farmers, however, must get 15- or 20-year loans just to get in the business. Once they sign a contract, new growers are required, at their own expense, to build chicken houses to company specifications — to the tune of $1 million for a basic operation. They agree to take on this debt — often putting their home or farm on the line — based on verbal promises and prospectus sheets from company representatives that assure rapid loan repayment and a steady income. But these promises, the growers in the film make clear, are not worth the paper they’re printed on.
Once the growers are committed to the industry by their debt, they are ready to work hard raising chickens to pay it off. But this is where the trouble starts. While the growers are on the hook for a long-term loan, they suddenly find that the company is only offering a contract for the next flock of birds — hardly the security they need. After a while, their pay becomes erratic as well. Clarence Leverette, a former chicken grower in Mississippi, says that his company promised him $16-21,000 for every flock of chickens, but after the first few flocks, his pay began to drop — down to $12,000 within a year.
Erratic payment is built into the system, in one of the most egregious parts of the whole arrangement. Informally called tournament, the payment system ranks growers in the same area against each other and pays them according to their rank. Growers who produce bigger birds get paid the stated base pay or more, while those who produce smaller birds get paid under the base pay. The company pays the same total amount for each flock cycle, but for the growers, an increase in one person’s earnings means a direct decrease in another’s earnings. The difference can be dramatic: one study shows a price of 4.32 cents per pound paid to growers at the bottom of the ranking, which was just 62 percent of the 7.02 cents per pound paid to those at the top. The companies say the tournament is healthy competition that rewards hard work. The problem is that the company provides all the inputs and protocols; the farmer is essentially carrying out orders, not really allowed to be a farmer. Differences in age or sex of the chicks, or in feed or medications can impact the birds’ growth rates. The company controls these factors but does not share any information, so the grower does not know what he is working with — he or she is essentially competing in the tournament blindfolded. There are many reports of companies giving lower quality inputs to farmers who complain, speak out, or otherwise try to improve their situation.
The Future of the Contract Farming
After laying out the contours of the industry and its impacts on farmers in the US, the film goes global. As domestic chicken consumption has leveled out, poultry companies are turning to developing countries for new markets and new growers. Following this trend, the filmmakers travel to southern India, where, if anything, life under contract is even worse than in the US. Indian growers report never being given a copy of their contract and taking ten years just to pay off the interest on their debt.
Filmmaker Sally Lee has directed the film at current and potential chicken growers, and at consumers. Of growers, who are often isolated and distrustful of each other, she hopes they will “see these farmers telling their stories and realize they’re not alone.” She hopes people in farming communities, where integrators are eagerly expanding their operations and making more false promises to potential new growers, will “understand these farmers’ stories and realize the risks involved, so they’ll think twice about signing a contract.” After years of researching this system and working with chicken growers, Lee knows how hard it is for farmers to tell their stories and for consumers to understand the industry — but how important it is for there to be transparency. “It’s a trend that’s moving from chicken to hogs to beef … production contracts are taking hold in the seed industry too. If we want an agricultural system that’s good for family farmers, entrepreneurs and consumers — well, this is not it. And we need to understand it in order to change it.”
Siena Chrisman worked with RAFI to write the viewers guide for Under Contract.