RAFI Responds to National Chicken Council Study

May 10, 2016

In a recent House committee meeting, Representative Harris (R-MD) justified a measure that would de-fund USDA’s protection of poultry farmers by citing a few strikingly odd facts: “chicken growers vote with what they decide to do” he said, “there’s a waiting list of 2000.” He also claimed that 94% of growers re-sign their contracts every year, and that thus 94% of growers must be happy.

Interesting logic! So if staying in contract means it’s a good contract, then I guess staying in an abusive relationship means it’s a good relationship, or staying in a job you hate means it’s a good job. The use of this statistic obscures the context of why farmers stay in those contracts. Harris basically misrepresented the reality of thousands of farmers in an attempt to prevent them from being able to defend their rights.

Last week, we learned the source of Harris’s claims. The National Chicken Council has released a study that was prepared for them by Dr. Elam, an economist with FarmEcon LLC. The National Chicken Council provided the data, which they gathered by surveying 20 poultry companies in September 2015. The survey did not include responses from actual farmers.

The study also utilizes proprietary data from AgriStats that only the integrators have access too. It is unclear how much this data should be relied upon given the opaqueness of the source.

Despite the lack of farmer voice and the use of opaque data sources, the report paints a false, overall rosy picture of the farmers’ side of the contract chicken business, using carefully selected and interpreted data to do so.

The main points of our concerns with the National Chicken Council study are as follows. [Click here to read our full response with additional data and farmers’ input.]

The real role of debt pressure in farmer choice: poultry is the most debt-leveraged sector in all of agricultural production.[1] That means poultry farmers are making decisions based on an incredible amount of debt pressure, and the fact that their home and farm are likely collateral on the loan for their chicken operation. In other words, they do not have the option to quit.

Lack of farmer choice to switch companies in the highly concentrated marketplace: More than 50% of poultry growers are in an area where they do not have more than 2 integrators to choose from.[2] Corporate concentration has led to fewer and fewer integrators controlling vast portions of the marketplace, creating regionalized monopsony power for companies. This has a real impact on growers that the National Chicken Council is ignoring. Contract growers in market areas with a single integrator received 8% less than growers in markets with four or more integrators, and growers have told researchers that they do not feel they can switch freely between companies.[2]

Farmers do not have transparent access to information when they sign up: Many farmers have told us they did not get accurate information about their estimated pay or expenses when signing the contract. USDA also does not track poultry specific statistics, like they do with hogs and cattle – and the industry shares it’s own data in a private source called AgriStats that is not made available to farmers. This is called asymmetrical information, and puts the farmers at a disadvantage in making business decisions.

The real decline in farmer pay: The study claims that declining farmer pay per-pound is compensated for by increasing efficiency, so farmers are raising more pounds overall. Using data from AgriStats, they claim that farmers’ pay per square foot has increased 13.1%. But they fail to mention the increase in farmers costs: upgrades, more expensive equipment, utilities, fluctuating fuel prices, waste management practices, etc.

Risky variability in chicken farmers income overall: The study compares average contract broiler farm incomes to all US households, and claims that 60% of broilers make more than the US household median income. But this statistical comparison does not hold up if it’s put in context.

Broiler farmers are a much, much more uniform group than all US households. It makes sense that households with CEOs will have much higher income than households with service workers. But poultry growers are all doing the same job. And, they are statistically similar in age, ethnicity, geographical region, and many other factors. The variability in their pay is greater than the variability in all US household incomes, and that means the system is unfair. The point is: They are doing the same job, but while the most favored growers make a lot, many make very little.

[Read our full response here with additional data and farmers’ input.]

[1] Ifft, J., A. Novini, K. Patrick. Debt use by US farm business, 1992 – 2011. (2014). Economic Research Service, Economic Information Bulletin No. 122. https://www.ers.usda.gov/media/1358634/eib122.pdf

[2] MacDonald, J. and N. Key. Market Power in Poultry Production Contracting? Evidence from a Farm Survey. Journal of Agricultural and Applied Economics, 44,4(November 2012):477–490. https://ageconsearch.umn.edu/bitstream/137136/2/jaae562.pdf

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