Features

November/ December 2012 Obama’s Game of Chicken

The untold story of how the administration tried to stand up to big agricultural companies on behalf of independent farmers, and lost.

By Lina Khan

In May 2010, Garry Staples left his chicken farm in Steele, Alabama, to take part in a historic hearing in Normal, an hour and a half away.

The decision to go wasn’t easy. The big processing companies that farmers rely on for their livelihood had made it known that even attending one of these hearings, much less speaking out at one, could mean trouble. For a chicken farmer, that’s no trivial thing. Getting on a processing company’s bad side can deal a serious blow to a farmer’s income—and even lose him the farm entirely. Still, Staples, a former Special Forces commander, and a number of other farmers decided to risk it. Many felt it was their only chance to talk directly to some of the highest-ranking officials in the country, including Attorney General Eric Holder and Agriculture Secretary Tom Vilsack, about the abusive practices now common in their industry. It was a chance, finally, to get some relief.

Staples and other farmers described a system that is worse in certain respects than sharecropping. It works like this: to do business nowadays, most chicken farmers need to contract with a processing company. The company delivers them feed and chicks, which farmers raise into full-size birds. The same company then buys those same birds back when they are full grown. The problem is that the big processing company is usually the only game in town. So it can—and usually does—call all the shots, dictating everything from what facilities a farmer builds on his farm to the price he receives for his full-size chickens.

As Staples explained, a processing company can require a farmer to assume substantial debt to pay for new chicken houses, tailored to the company’s exact specifications. Staples said he himself had borrowed $1.5 million. Then the company will offer that same farmer a sixty-day contract that can be changed or terminated by the company for any reason at any time. If a farmer gets fed up with the chronic uncertainty and tries to negotiate better terms, the company can punish him by sending lousy feed or sickly chicks, thereby depressing his earnings. Or the company can simply undercount the full-grown chickens’ weight. Whatever the particular abuse, because there are now so few processing companies—often only one or two in a farmer’s geographic area—there’s little way out of the cycle. For many chicken farmers in America, the only real option is to accept the terms, even if those terms are slowly driving them out of business. And even if those terms keep them from publicly speaking their minds.

Staples told the crowd at the hearing that he feared that Pilgrim’s Pride, the processing company with which he contracts, might punish him for voicing his troubles. Later, Christine Varney, the government’s chief antitrust regulator at the time, who was sitting in front of an American flag, spoke up. “Mr. Staples, let me say, I fully expect you will not experience retaliation by virtue of your presence here today,” she said, handing him a piece of paper with her phone number on it. “But if you do, you call me.” The hearing erupted into applause.

The message seemed to be clear: the highest brass in the Obama administration was listening closely to how America’s independent farmers are pushed around by big companies, and they were no longer going to tolerate it.

For the next seven months, Holder, Vilsack, Varney, and other officials from the Departments of Justice and Agriculture toured the country, hearing from more farmers and rural advocates. Along the way, they learned about concentration in the seed, pig, cattle, and dairy industries, as well as in poultry. During this same period, the USDA also worked on revising and updating the main law that regulates the livestock industries to prevent many of the unfair and deceptive practices that now threaten the dignity and survival of farmers and ranchers. From dairy farms in Wisconsin to cattle ranches in Montana, hopes soared.

But today, two years on, almost nothing has changed. Big processing companies remain free to treat independent poultry, cattle, and dairy producers largely as they please. “You had farmer after farmer after farmer telling the same story, basically pleading for help, and absolutely nothing has come of it,” said Craig Watts, a poultry farmer from Fairmont, North Carolina, who drove 512 miles to attend the hearing in Alabama. Staples agreed. “We had really thought something might change.”

A generation ago, it seemed that Americans had solved the problem of monopoly in agriculture. Following the election of President Woodrow Wilson in 1912, the government gradually weakened the plutocrats’ stranglehold over most of America’s agricultural business.

The government’s primary tools were two pieces of law. One was antitrust law, which included the Sherman Antitrust Act of 1890 and the Clayton Act of 1914. In 1919, for instance, the Federal Trade Commission wielded the Clayton Act to reduce the power of the “Big Five” meatpacking companies. These companies, the FTC noted, “had attained such a dominant position that they control at will the market in which they buy their supplies, the market in which they sell their products, and hold the fortunes of their competitors in their hands.”

The other main piece of law was the 1921 Packers and Stockyards Act, signed by President Warren Harding. It broadly prohibited unfair and discriminatory conduct in the marketplace and established standards by which to hold meatpacking companies and stockyards accountable. Often called the “Farmer and Rancher Bill of Rights,” the act made it illegal for big meatpackers to pay farmers less than market value for their livestock or to arbitrarily advantage some farmers at the expense of others. As one congressman noted at the time, the Packers and Stockyards Act was “a most comprehensive measure,” possibly extending “farther than any previous law into the regulation of private business.”

Over the next few decades, independent ranchers and farmers thrived under the protection of these two bodies of law. For the most part, farmers were able to sell their products relatively freely on the open market, and prices were established transparently through open bidding, in public auctions attended by many buyers and many sellers. The effect on the structure of the market was dramatic. In 1918, the five largest meatpacking companies in the country controlled 55 percent of the meat market. By 1976, the four largest controlled only roughly 25 percent of it.

Over the last quarter century, this progress has been reversed. Today, the top four meatpacking companies control 82 percent of the beef market—an unprecedented share of the pie.

The worst abuses in today’s livestock industries can be
traced back to two fundamental changes in the structure of the market, acting in combination.

Lina Khan is a reporter and policy analyst with the Markets, Enterprise and Resiliency Initiative at the New America Foundation.

Comments

  • DC M on November 14, 2012 10:55 PM:

    Too many people for the planet requires terrible crowded factory farming. Churches and corporations need new consumers to grow. How it fix and how to make changes in a bad economy when many are on foodstamps or less and cant afford organics and free range ?
    As it is, people like me on fixed incomes often have deficiencies and if forced to live on high priced organics and happy chickens we wouldn't last long.

  • Florence Dezeix on November 16, 2012 7:43 PM:

    Thank you for writing this article. It is good to know the facts. Fear of scarcity plays in the hands of agribusiness. It would be interesting to compare what percentage of their income a family in America spends in food. People in Europe spends a higher percentagd on real food, not juices, power bars, vitamins. i appreciate the time and effort spent in writing this article,
    Sincerely,

  • Holly on November 17, 2012 11:53 AM:

    Good history. But is the story really over?
    I hope that in Obama's second term, we can return to efforts to protect independent farmers from exploitation by big processing companies and abuses by large agribusiness.

  • Melissa on November 18, 2012 7:31 AM:

    Fear of scarcity and concerns over end prices to consumers are an issue linked to the (I believe erroneous ) perception that we need animal protein in every meal. Cheaper sources of protein are available in legumes for example and it might help put a lot of things in perspective to look at things from this angle. Ie potential allies in this fight, strategies to help counter the meat packers power etc..

  • Joanne on November 18, 2012 11:05 AM:

    Good article and information.
    Somebody or something is paying for all the cheap meat being produced by the corporate ag system. Our culture needs to be more mindful and conservative in our eating habits (and living habits) many have gotten use to an over-consumtive way of life as being the norm. Education on these issues is important.
    Support local small farms and grow your own. Support, in some way, local businesses, community associations, non-profits that are working for good change. It is happening everywhere. Help it grow - "be the change"!.

  • DG on November 20, 2012 4:20 PM:

    Well-researched and well-written article, thank you. We need to circulate petitions to the White House to get the President back on track with these issues, which are complex, but not that complex that they cannot be solved. Thank you for this information.

  • Heaterman on November 20, 2012 11:22 PM:

    One of the biggest road blocks to "local" production/consumption is the enormous burden placed on slaughter houses and packing operations by USDA. It is against the law to process and sell meat which has been butchered in anything but a USDA inspected facility. We need to get some of the ludicrous rules regarding meat processing thrown out so competition can come in under the big packing operations or things will only continue to get worse.
    This is a good example.......Farmer Jones has a cow that breaks her leg and needs to go to the slaughter house. Since the "mad cow" tempest in a teapot, USDA has decreed that any animal has to be able to walk in under its own power. Obviously, there is nothing wrong with the broken legged cow or the meat it will provide but because USDA says it has to walk, all that can be done with it out on the farm is to be killed and buried. What a waste!!! People all over the world are starving, even people right here in the country. Why can't USDA regulate with a little common sense?

  • Name Withheld on November 26, 2012 8:19 PM:

    Great article. The only problem was the faint left-leaning political bias that was unproductive. It was the corporate interests that killed this agricultural markets reform. Not a Republican conspiracy. That needed to be made more clear.

  • Anonymous on November 26, 2012 8:34 PM:

    We all get to vote 3 times a day. Buy organic and non-GMO foods. Many organic products are only 10% more expensive than their pesticide-laden counterparts. Organic bananas usually only cost a couple cents more per pound than regular bananas, for example. Shop at Whole Foods, Trader Joe's, your Saturday farmer's market, and online. If you're concerned about the extra cost, buy in bulk and cut back on some of the frivolous purchases. Right now, organic foods are only 5% of the market. But if we keep buying them, they will grow and grow.

  • Jeanne Rohl on February 21, 2013 12:38 PM:

    If you think that this systematic destrucion of agriculture is do any paricular politcal party you folks need to do more research and stay totaly unbiased. This is a good article and very informative for those who don't know what has been going on since the turn of the last century. Even before that if you want to get really technical. The powers that be, want the land. They will get it just as they did from the First Nations people. We farmers and ranchers have only been the pawns. I used to counsel poultry farmers and hog farmers who were caught in these traps. They(the government, the multi nationals, the trade entities and the processors know exactly what they're doing. Who controls the food supply controls the people. Good reading for anyone who actually wants to educate themselves on this issue. I recommend the NORM Primer (National Organization for Raw Materials Economics, FOODOPOLY and Dollar Harvest for starters. Read the policies of the Committee For Economic Development. This all has been carefully planned and implemented. Don't know if there is much we can do about it now. No one would believe it or labeled us "conspiracy quacks". The jokes on the non farm consumer and the packman theory of pushing your neighbor out(because YOU are the BETTER farmer don't cha know)by the Bank lenders. LOL We got us a "cheap food policy" while all said groups above have reaped billons of stolen profits off the backs of a few.