RAFI Praises USDA’s Proposed Rule on Poultry Tournament Systems

— Rule will allow contract poultry growers to reliably estimate their income for the first time in decades —

[Pittsboro, NC, June 3, 2024] Today RAFI (Rural Advancement Foundation International) applauds Secretary Vilsack and the USDA for proposing a new rule under the Packers and Stockyards Act that will reform poultry contracts and tournament systems, ensuring that growers always receive a consistent base price for the flocks they raise and that any bonuses they receive are fairly calculated. The rule will also require any requests for additional capital investments by poultry corporations or “integrators” to growers be accompanied by a “Capital Improvement Disclosure Document” that will help growers determine if they can reasonably expect to recoup any capital investments they are encouraged or required to make on their farms. RAFI has been fighting alongside contract growers for basic reforms like these for decades,” says Edna Rodriguez, RAFI’s Executive Director. “This rule from USDA is a landmark moment for poultry growers in their long struggle for basic fairness in their contracts.”

This rule builds upon USDA’s Transparency in Poultry Growing Contracts and Tournaments rule, recently finalized by USDA. Its requirement of a fixed base price in poultry contracts will work alongside the transparency rule’s required disclosures of flock placement and stocking density to ensure for the first time that prospective growers can more reliably project the minimum income they can expect to earn on their contracts. The proposed rule also aligns with recent judicial precedent: fixed base prices in poultry contracts were required in the consent decree imposed upon Cargill’s Wayne-Sanderson by the Department of Justice in 2022. The proposed “Poultry Grower Payment Systems and Capital Improvement Systems” rule will make some needed improvements to the poultry payment system by:

  • Requiring poultry contracts to contain a fixed base price that cannot be reduced by any performance incentive or grower ranking system.
  • Imposing a “Duty of Fair Comparison” upon poultry integrators utilizing any performance incentive or tournament ranking systems to ensure that any bonus systems that compare growers based on flock performance do so fairly and account for variable input quality.
  • Ensuring that integrators transparently present growers with an account of how any requested or required additional capital investments on their farms can be reasonably expected to be recouped by the contract grower in compliance with 9 CFR § 201.216.

“Under most current contracts, growers cannot reliably expect to receive the base price articulated in their contracts because the tournament system may penalize them for factors controlled by their integrator and transfer some of their pay to another grower,”  says Aaron Johnson, Policy Co-Director at RAFI. “USDA’s Poultry Grower Payment Systems and Capital Improvement Systems rule will finally guarantee that a base price in a poultry contract is not actually a variable “starting price,” but is instead a fixed and reliable base price. Combined with the requirements of the USDA’s recently finalized transparency rule, this will — for the first time in decades — solidify contract growers’ ability to reliably estimate their expected income under their contracts.

“Integrators request capital investments by leveraging contracts that give them control over nearly every aspect of a grower’s operation, allowing them to outsource financial risk and make little to no guarantees of reasonable recoupment,” says Melanie Canales, Challenging Corporate Power Project Manager at RAFI. “Growers who resist these changes are often retaliated against with inferior stock, feed, and medical care, further impacting their ability to cultivate a financially viable flock. These new disclosure requirements will empower growers to more reliably assess capital investment requests made of them and alert the USDA if these requests are unreasonable.”

The tournament system is a manipulative scheme designed by poultry processing corporations to stabilize and control their own production expenses — in the form of prices paid to farmers—while transferring as much of the financial risk involved with growing chickens as possible onto growers they contract with. Contract poultry growers do not own the chickens they raise, nor do they control what feed or medicine is provided to their flock — these are all provided by the integrator. Contract poultry growers are tasked with achieving the most efficient possible growth of their flocks for the least amount of feed  — which is expressed, in performance terms, in their statistical feed conversion efficiency. It is vital at this point to note that the final weight and feed conversion efficiency of a broiler flock depends mainly on the initial health and gender of the chicks, the quality and reliable availability of their feed, and the timing of flock pick-up — all factors that are controlled by the integrator, not the contract grower.

When these growers’ flocks of fully grown chickens are picked up by their integrator for processing, the corporation does a detailed analysis of the feed conversion performance of each grower in that week’s “tournament group.” It then averages these statistics, docks the pay of the growers whose flocks were found to be below average, and transfers that money to growers of above-average flocks as bonuses. In essence, the effect of this system is to stabilize and externalize the costs of the integrator while accomplishing an extractive transfer of bonuses to some growers by penalizing others — all within a system that is heavily influenced by integrator-controlled inputs and actions. 

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RAFI (Rural Advancement Foundation International – USA) is a nonprofit organization challenging the root causes of unjust food systems, supporting and advocating for economically, racially, and ecologically just farm communities. (www.rafiusa.org)

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