Contract Farming: The New Serfdom

"Quite early one morning," wrote the Welsh poet Dylan Thomas, "I heard the cock's crow from hidden farmyards." For thousands of years, in innumerable cultures, the cock's crow has been synonymous with first light of morning. In the rural America of 50 years ago, the silver of a summer's dawn brought the crowing of roosters, from east to west, farm to farm, all across the heartland.

If one wishes to hear a rooster crow today outside the farms of a few stubborn traditionalists, one must go to the third world. America's clucking barnyard flocks are gone; in their place are huge, lightless factories. As the cock's crow heralded the dawn, its absence signals industrial darkness that has robbed most that was joyous and natural about American agriculture.

The statistics tell the story. In 1950, 95 percent of American farmers had at least a few chickens; rare was the farm on which you could not buy eggs. Today, barely over 2 percent of farms raise chickens commercially. In the overwhelming majority of these cases, those raising the chickens do not own them—the chickens are owned, processed and marketed by corporations. The corporations supply the feed the chickens eat and supervise every phase of production. Farmers are no more than cogs in an industrial machine that now produces 35 billion pounds of chicken annually.

The corporate blitz of poultry, largely consummated in the 1970s, was followed in the 1980s and 1990s by a takeover of hog production. In the period immediately post-World War II—good times for farmers—there were around 5 million farms in the United States. Well over 2 million farmers raised hogs. In 1986, there were still 670,000 hog farms. Today, as the corporate conquest nears completion, there are barely 80,000 hog farmers remaining. Once again, many are "contractors" who do not even own the hogs they raise.

While mega-projects such as Premium Standard Farms' (being absorbed by Smithfield Foods; see below) huge hog factory complex in northern Missouri draw more public attention, the contract system that began in the American chicken industry is becoming a prime engine of corporate dominance. It is not only a feature of corporate hog raising, but it is also now spreading into dairy, beef and field crop production, and even showing up in Europe and the Indian subcontinent. Smithfield Foods is aggressively trying to establish contract hog farming in Poland and Romania. "Why buy a farm," asked one trade journal, "when you can buy a farmer?"

In March, Polish consultant Marek Kryda traveled to the United States for an Animal Welfare Institute (AWI) contract farming workshop with American experts—representatives from Rural Advancement Foundation International (RAFI) and the Delmarva Poultry Justice Association (DPJA) and Arkansas hog contractors Tim and Christy Hays. Both RAFI and DPJA were established to try to protect contractors from the tyranny of corporate "integrators." The Hays' are involved in a quixotic and desperate lawsuit against Cargill, the world's largest privately held company. Our hope in hosting the workshop was to learn enough about the tactics of corporate integrators in America to thwart their advance in Central Europe.

A farmer who becomes a contractor commits to being part of a vertically integrated system in which every aspect—production, processing, distribution—"from embryo to market shelf" is controlled by the integrator. According to DPJA President Carole Morrison, herself a chicken contractor, farmers (called "growers") "provide the land, buildings, equipment, utilities and labor in raising the birds to a marketable age, while the companies supply the chicks, feed and medicine. The grower is also responsible for dead bird and manure disposal." Hog contracting is essentially the same.

The contracts themselves are stunningly one-sided. The integrator arrogates to itself the right to arbitrarily amend or terminate. Payment is made according to a set formula based on pounds of meat delivered minus company financed "inputs." But the integrator performs the calculations, and the books are closed to inspection. The grower has no say as to the quality of the chicks provided or the content of the feed and medicine. The grower stands liable for environmental damage, though it is the integrator who is eligible for federal disaster relief and farm subsidies. On top of all this, the grower is forced to surrender the right of legal recourse and accept "compulsory arbitration" in disputes with the company.

The economic results of such contracts are about as one would expect. Industry moguls like Don Tyson and "Bo" Pilgrim have grown fabulously rich, sometimes enjoying a 20 to 30 percent annual return on their investments. The contractors, on the other hand, average 1 to 3 percent annual return—despite the fact that their land and buildings equal at least half of the industry's capital investment. A survey by the Louisiana Technical University revealed that 71.6 percent of American chicken growers have incomes below the poverty level.

"But why," we asked, "would 30,000 chicken farmers and thousands of hog farmers submit to no-win contracts that relegate them to serfs on their own land? Why would they sign them?" Former RAFI President Mary Clouse had the answer. "Most of them didn't!" she said. "The contracts most people signed when they entered the business were much fairer. But the renewal contracts have been progressively more vicious. Once you have borrowed hundreds of thousands of dollars to build 300 to 500 foot long chicken sheds, you must have chickens and a market for them to pay off the loan. Without a contract, there is no market. The grower has little choice but to accept company terms. The alternative is to lose your farm—thousands have—or spend years working to pay off loans on useless empty buildings."

"When my husband and I began raising chickens," Clouse continued, "there were a thousand integrators competing with each other for growers. Business was done with handshakes. But as the most efficient and ruthless companies eliminated their local competitors, this changed. Today, there are only 40 integrators left; five of these—Tyson's, Pilgrim's Pride, Gold Kist, Perdue Farms and Wayne Farms—distribute 60 percent of the chicken produced. And believe me, they are absolutely remorseless."

At this point, I asked a question that revealed how little I really knew. "You say contractor ranks include inexperienced people, farmers down on their luck, even city folks who have sold their homes to buy land. What possesses banks to loan huge sums to such people? Do the integrators countersign the notes?" I inquired. "Of course they don't," Clouse responded. "The integrators assume zero risk! At one time, the Farm Home Administration loaned money directly to growers. Today, banks make the loans, but they also take very little risk. Most loans are guaranteed to 90 percent of the principal by the Farm Services Agency of US Department of Agriculture."

There, like a flash of lightning in blackest night, was the answer to the puzzle of how men like Frank Perdue and Don Tyson could gain control so rapidly and act with such ruthless impunity. They have a partner—a silent partner, but one of enormous power: the US government. There is no way, absent federal loans and loan guarantees, that they could have turned growers, in the felicitous language of the Baltimore Sun series "The Plucking of the American Chicken Farmer," into "landowning serfs in an agricultural feudal system."

The iron rule of agribusiness economics is to force others, ultimately the public, to pay much of the real costs. To achieve this, it is necessary to gain control of the political and administrative processes. This is the sine qua non of Big Ag. It always was, through centuries of European feudalism, to the East India Company and the slave-tilled plantations of the New World to the present day. No one, it seems, managed it more efficiently than those who industrialized meat production in the United States. In a repulsive but revealing bit of megalomania, Tyson runs his Arkansas-based empire from an exact replica of the White House oval office.

Corporate chicken is cheap and plentiful, but the real costs of industrialized animal production are staggering. It has brought mass cruelty to farm animals, on a scale and to a degree unique in human history. It led to the elimination of hundreds of thousands, perhaps millions, of independent farmers. And it has created such absurd economic distortions that the state of Iowa—in the heart of the nation's "breadbasket"—imports 80 percent of the food its citizens eat.

Animals in confined animal feeding operations (CAFOs) now generate 500 million tons of feces a year, three times more than America's human population. Unlike human sewage that receives primary, secondary and tertiary treatment, this feces is left untreated. Some is strewn on the ground; some is liquefied and stored in fetid "lagoons" that blanket entire rural counties with nauseating stench. Agricultural runoff has created bights—anoxic zones where nothing lives—in scores of estuaries. For instance, Chesapeake Bay was once renowned for its productivity. Today at its late summer peak, 40 percent of the Chesapeake is covered by a "dead zone" fed by the massed chicken factories of Eastern Maryland and Virginia.

Smithfield Foods Swallows Premium Standard Farms
In a startling development, Smithfield Foods, the world's largest pork production company, announced its intended purchase of Premium Standard Farms—the sixth largest pork producer in the United States, second only to Smithfield in the number of sows it owns. If the deal, reportedly involving $810 million in stock and cash, is voted for by Premium Standard stockholders and agreed to by the Antitrust Division of the Department of Justice (both virtual certainties), Smithfield will add 221,000 sows to its current US herd population of 798,000.

This leaves Smithfield with over a million sows and an annual production of feeder pigs approaching 20 million, as well as 1.2 million sows internationally. The company will own nearly 20 percent of the hogs in the United States and slaughter 31 percent of the animals processed annually. Currently, only 10 percent of the hogs marketed in the United States are sold on the free market; the rest are owned by corporations or "locked up" under contract. Despite the outcry of farm state Senators, this situation is all but certain to deteriorate or become even more anti-competitive.

Premium Standard, whose hogs are concentrated in three northern Missouri counties, has long been notorious for its flouting of environmental laws and domination of the Missouri legislature against the fierce, but unavailing resistance of local citizens. While the circumstances promise to become even worse with Smithfield in control, in the meantime, three families unhappy with the smell associated with one of Premium Standard's Kansas City facilities have been awarded $4.5 million in compensation. In a separate class-action lawsuit, a consortium of law firms is seeking to represent owners of property within 10 miles of the company's Missouri facilities.

Nor do consumers themselves necessarily escape unscathed; since 1970, meat-borne food poisoning has increased by up to 500 percent. A national non-governmental organization called Safe Tables Our Priority (STOP) was founded entirely by mothers of children who died or were made desperately ill by meat-borne pathogens. If this is not enough, it has emerged that 70 percent of chickens raised in the United States are being fed an organic arsenic called Roxarsone as a growth promoter. Much of the chicken sold has slight but detectable traces of arsenic.

Worse, the compound, which breaks down into metallic arsenic, is present in chicken litter in amounts of 30 to 50 milligrams per kilogram. Twenty to 50 tons of arsenic are "distributed" each year on the Delmarva Peninsula of Delaware, Maryland and Virginia alone, as well as hundreds of tons nationwide. Arsenic is a potent human carcinogen. A lawsuit now underway alleges that a "cancer cluster" in Prairie Grove, Ark., in the state's "chicken belt," is caused by arsenic from chicken litter. Whether this lawsuit will open the lid on an enormous scandal or be suppressed remains to be seen.

The hog factory infestation of the 1990s ended public passivity. Afflicted communities are defending themselves, often successfully. Hundreds of groups, local and national, have taken the field against animal factories. At the same time, the demand for organic food now exceeds supply. The giant fast food franchises, scenting the wind, are pressuring their corporate suppliers to reform.

But for all these encouraging signs, the pervasive corruption that lubricated the corporate takeover to begin with is unrelieved. All three branches of the federal government are infected; honest officials and judges are as Prometheus on his rock. Local victories are often drowned in state legislatures, reeking with corporate influence. Companies such as Smithfield and Cargill have shifted the main thrust of their takeovers to Europe and the third world. The system remains rigged in their favor, and there is no sign of general retreat.

Of the many evils that beset us—war, global warming, tropical deforestation, extinctions, declining productivity of the oceans, and the massive third world influx of rural people to urban slums—few are unlinked to the drive by transnational companies to take control of the world's food supply. Issues currently boiling up in the press, such as the "obesity epidemic" and illegal immigration are intimately connected. Corporate agriculture is a voracious consumer of immigrants—legal and illegal—for jobs too dangerous, unhealthy and poorly paid to draw American workers.

The course of meat processing should surprise no one who knows something of its earlier history or has even read The Jungle. But both factory farming and the contract system we must now confront began with domestic fowl—the earliest, most widely distributed, most benignantly husbanded of farm animals. How can seemingly beneficial developments, beginning with the invention in 1900 of the electric hatchery by Granville Woods, the self-taught genius known as the "Black Edison," have combined to such malignant result? A comprehensive history has yet to be written.

But our forbearers, with their sterner view of human nature, would hardly have been surprised. About slave owners, of whom those who now control Big Ag are surely spiritual descendents, Abraham Lincoln said this: "It is the same spirit that says, "You work and toil and earn bread, and I'll eat it." No matter in what shape it comes, whether from the mouth of a king who seeks to bestride the people of his own nation and live by the fruit of their labor, or from one race of men as an apology for enslaving another race, it is the same tyrannical principle."

The generations before us could hardly have imagined the nature and magnitude of the planet's reaction to industrial civilization, converging like a vast, fleering nimbus front over all the future. But Lincoln, returning, would grasp at once that the Jeffersonian vision of a "nation of virtuous and independent farmers" that seemed to have found its substrate with the Homestead Act of 1862 has been subverted—and the "same tyrannical principle" is again enthroned.

The Stench Spreads to Central Europe
Whether Big Ag will be able to transplant the extraordinary contractor racket it has perfected in America to Central Europe (where AWI is active) depends on two things. The first is whether it can corrupt government sufficiently to flout environmental, health and safety, immigration and antitrust laws as they have in the United States. The second is whether it can inveigle governmental institutions into providing loan guarantees and other subsidies. In Poland, the "Law and Justice" government struggling to remain in power as we go to press is dedicated to establishing honest government and rooting out vested interest domination. In Romania, despite the fact that European Union funds can be used for 50 percent of "improvements," the effort to enlist contractors has fallen on stony soil.There is still a chance to stop the pernicious system in its infancy. We shall surely try.