The Hidden King: An excerpt from 'The Meat Racket'


Prologue

The Hidden King

The Meat Racket
The Meat Racket by Christopher Leonard

Nobody ever visits the stranded little community of Waldron, Arkansas. But even if they did, a tourist would never see the place for what it really is. Most outsiders would be fooled into thinking it was an actual small town.

On any given morning, the residents awaken and begin their routines along Main Street. Old men park their pickup trucks by the curb in front of the Rock Café, which opens early for breakfast. As the café’s booths and tables fill up, a congregation of old-timers in cowboy hats gathers in a loose ring of aluminum chairs out front, smoking and talking and stubbing out their cigarette butts in a bucket full of sand. Later in the morning, Chambers Bank on the south end of town opens up and the tellers cheerfully greet customers by name. On Thursday at noon, the livestock auction opens in a cavernous barn on the north side of town, drawing crowds of ranchers who haul steel trailers behind their trucks, with cows staring out between the horizontal slats. In the late afternoon, teenagers park their cars by the gazebo south of the auction barn, proudly displaying their Mustangs and Broncos like big game trophies.

These events have a rhythm of their own, the clockwork functioning of a small-town economy. But it’s just window dressing. All of it could cease to exist in a moment and have no impact whatsoever on the true Waldron, or its true economic reason for being. The real tempo of the town’s economic pulse is measured by the coming and going of semitrucks that roll down Main Street at periodic intervals, twenty-four hours a day, seven days a week. In the middle of the night tanker trucks full of animal feed rumble past the empty stores and out onto country roads that lead into the hilly terrain that surrounds town. At dawn, other trucks trundle in from the hills, heaped high with battered metal crates full of chickens that exude clouds of white feathers along the highway. The tempo can be measured in the regular arrival of train cars full of grains and oilseeds that dump their loads at a feed mill that clanks and hums and churns all night, and in the parade of refrigerated trucks that pull up to a slaughterhouse near the feed mill and get loaded with pallets of frozen meat. This is the real functioning of Waldron, Arkansas, and its true reason for being. This is the heartbeat of Tyson Foods, the nation’s biggest meat company.

The Tyson plant on the north end of Waldron is the only thing that keeps the town on the map. Appropriately, many residents simply refer to it as “the complex.” That’s because the Tyson plant isn’t just a factory; it’s more like an entire small-town economy consolidated into one property. The complex contains its own feed mill and hatchery, its own trucking line and a slaughterhouse that covers several acres of land and processes about one million dead chickens a week. The complex is like an economic dark star that has drawn into itself all the independent businesses that used to define a small town like Waldron, the kinds of businesses that were once the economic pillars of rural America.

Of course, tourists to Waldron would never see the Tyson plant, and not just because it sits on the northern fringe of town and away from Main Street. Visitors are stopped at its front gate and forbidden from exploring the grounds. So a tourist would have to be content to stroll along the sidewalks downtown, observing the fake Main Street, the deceptive array of little businesses that make it seem like a community.

This illusory appearance cloaks Tyson’s existence all the way from its roots in rural America to the grocery store shelves and restaurant menus where its products finally reach consumers. The average shopper is usually fooled when he or she peruses the meat aisle, seeing what appears to be an abundance of choices and products. The Tyson brand name wouldn’t necessarily stand out, with its logo gracing just a handful of products. But the rotisserie chicken slowly turning in its oven, the Bonici brand pepperoni, the Lady Aster brand chicken cordon bleu, the frozen chicken pot pie and the Wright Brand bacon all come from the same company: Tyson. And then there is all the unlabeled meat that Tyson floods into the U.S. food system every day: the meat served in cafeterias, nursing homes, fast-food restaurants, and suburban eateries where more and more Americans eat their meals. There is a very good chance any of the meat purchased in these places was made by Tyson. Even if Tyson did not produce a given piece of meat, the consumer is really only picking between different versions of the same commoditized beef, chicken, and pork that is produced through a system Tyson pioneered. Tyson’s few competitors have resorted to imitating the company’s business model just to survive.

This book aims to explore the vast, hidden territory between the remote farms and towns like Waldron where Tyson raises millions of animals, and the final point of contact where consumers buy the company’s meat. Unseen between these two poles is a hidden power structure that has quietly reshaped U.S. rural economies while gaining unprecedented control over the nation’s meat supply. Just a handful of companies produce nearly all the meat consumed in the United States, and Tyson is the king among them. The company sits atop a powerful oligarchy of corporations that determines how animals are raised, how much farmers get paid, and how meat is processed, all while reaping massive profits and remaining almost entirely opaque to the consumer. Because Tyson and its imitators are based in the geographic and economic fringes of America, in forgotten places like Waldron, the company has managed to escape the scrutiny it deserves.

While Tyson’s operations are remote, the company’s business practices affect virtually everyone. About 95 percent of Americans eat chicken, which means they almost certainly eat chicken produced by Tyson. Because of this, American consumers are using their money to support a system that keeps farmers in a state of indebted servitude, living like modern-day sharecroppers on the ragged edge of bankruptcy. The system extracts its costs from consumers as well. There is so little competition in the meat industry today that companies like Tyson can virtually raise the price of meat at will. And these companies have been raising prices more and more in recent years, even as the wages of U.S. households have stagnated.

This situation is nothing new. When companies gain power over a market, they use it. Back in the early 1900s, a similar oligarchy of meat companies controlled the industry and earned the nickname the Meat Trust. These companies depressed the prices they paid farmers for meat, while raising the prices they charged consumers—just like Tyson Foods is doing today. But unlike the last time around, the modern Meat Trust isn’t facing significant resistance from government officials. There is no Teddy Roosevelt in sight, no president willing to fight corporate power on behalf of consumers and farmers. The Obama administration launched a halting attempt to reform the industry in 2010, and its failure to do anything meaningful only entrenched the power of Tyson and its allies. If change is to come, it will have to originate with the people who buy meat and those who raise it.

The first barrier to change is the fact that everything about Tyson Foods seems hidden, from its industrial farms behind locked gates to the company’s pristine headquarters in Springdale, Arkansas. Until very recently the only way to get to the company’s main offices was to drive down a winding country highway, past dilapidated old chicken farms and feed mills until the road crested a hill, suddenly bringing into view a pristine campus of black steel-and-glass buildings. Even in its splendor, Tyson seeks obscurity. Examining the company is all the more difficult because of the apparent code of silence of its employees, and fear of retaliation on the part of virtually anyone who works with it.

But there is no way to better understand the way our food is produced than to understand Tyson Foods. Tyson hasn’t just insinuated itself into virtually every corner of the modern food system; Tyson helped invent the very system itself. The company was founded in the depths of the Great Depression, just as American agriculture was undergoing the greatest upheaval in its history. The company helped redraw the new system that emerged. By doing so, it wrote the blueprint for modern meat production.

At the core of Tyson’s strategy is an economic principle called vertical integration. In a nutshell, this refers to the way companies buy up the outside firms that supply them (picture what would happen if Apple Inc. bought the company that sold it microchips). When a company becomes vertically integrated, it takes under its control and ownership all the independent businesses that once supported it. In Tyson’s case, the company has swallowed up all the businesses that used to make up a small-town economy. It owns the feed mill, the slaughterhouse, and the hatchery. It owns the trucking line and the food-processing plant where raw meat is packaged and cooked into ready-to-eat meals. While Tyson doesn’t directly own most of the farms that supply it with animals, it controls them through the use of restrictive contracts. It’s as if the broad-based network of small businesses that were once the backbone of rural America had been sucked into a single, towering silo called Tyson Foods. The company controls and owns everything that happens inside it. There is no competition among the various entities, no free market to determine the price at which baby chicks are sold to farmers or at what price grown chickens are sold back to a slaughterhouse. It all happens within the walls of Tyson’s corporate structure.

Tyson first pioneered this model in the poultry business. Then the company expanded into raising hogs. Within two short decades America’s independent hog industry was wiped out and replaced with a vertically integrated, corporate-controlled model. Ninety percent of all hog farms disappeared. The amount of money spent at grocery stores went up, but the amount of money farmers received went down. Companies like Tyson keep much of the difference. The cattle industry is the last holdout against vertical integration, but even the cowboys are starting to buckle under the pressure to surrender their independence. Tyson and three other companies so dominate the beef industry that they have been able to short-circuit the once vibrant cash market for buying cattle in the United States, giving them power to control the nation’s ranches and feedlots even if they can’t own them outright.

From the 1960s through the 1990s, this industrial meat machine provided tremendous benefit to American consumers. By industrializing animal production, Tyson’s system rewrote the stubborn biological equations that once constrained the meat industry. Between 1955 and 1982, the amount of time it took to raise a full-grown chicken fell from 73 days to 52 days. And the chickens got bigger during that time, expanding from an average 3.1 pounds to 4 pounds. Perhaps most impressive of all, it took less and less chicken feed each year to accomplish this feat. In 1955 it took about 285 pounds of feed to grow 100 pounds of chicken. By 1982 it took less than 208 pounds. A similar trend held for pigs and, to a lesser degree, cattle during that time.

The benefits of this transformation were passed from the farms to the consumers as Tyson aggressively competed to win a bigger share of the U.S. market. People didn’t see the radical transformation that was taking place on American farms, but the benefit invisibly accrued to their food budgets with each pound of Tyson chicken, beef, and pork they brought home. But this benefit wasn’t free. Consumers got savings up front, but they paid for it over time. Essentially, consumers traded away the U.S. farming system in order to get the up-front savings from industrial meat. Each new Tyson farm, and each new Tyson meat factory, ate away at the fabric of a profitable sector of Middle America’s economy.

Ironically, just as consumers traded away control over the way meat is produced, the meteoric production gains of industrialized animal production started to fade away. After realizing the huge boost of savings that came from raising animals in factories, the growth curve started to flatten in the 1990s. It seems that the genetics of the poor chicken have been pushed about as far as they can go. Today, no matter what Tyson or its competitors do, they seem to have run up against a wall of just how cheaply you can raise a bird on a given amount of food. The same thing is happening with the hog and the cow, who appear to be getting as fat as the laws of biology will allow on their given rations of feed.

The cost-savings from factory farming are slowing down, but Tyson’s control over the marketplace has not loosened. Once the broad-based meat industry was traded away for a vertically integrated one, the deal could not be easily undone. The economies of scale now make it almost impossible for new competitors to enter the field and compete head-to-head with Tyson and its imitators. The tallest ramparts that protect Tyson’s rule are its network of meat factories in places like Waldron. To compete against those facilities, a new company would need to invest hundreds of millions of dollars up front, before the first day of business. It would need animals, of course, and Tyson has much of that supply locked down with its contracts. And a competitor would surely know that even if it built a plant and secured supplies of chickens or hogs, Tyson and its few competitors have the ability to flood the market with product and make prices collapse in the short term, a hardship they could surely endure while an upstart struggled. The competitor would need to surmount these obstacles for the relatively lousy promise of just a one to three percent profit margin. Needless to say, upstarts are hard to find.

This makes the oligarchy of meat companies virtually impregnable, and as a result they don’t have to compete too fiercely with one another on price. That’s another key reason why the economic gains of the industrial meat machine’s early years have disappeared. Since the mid-1980s, when consolidation among Tyson and its peers really began, the price of meat has risen steadily, even as farmers have been getting paid less out of every dollar spent on food. In translation, that means companies like Tyson are extracting savings from the farmer without passing them on to the consumer. In 2008, food prices jumped 6.4 percent. After falling during the Great Recession, prices are climbing once again, and only the tepid competition between Tyson and two or three other companies can be expected to bring them down.

Not only does Tyson have control over how meat is priced, it also sets the rules for how meat is produced. To take just one example: At the feedlots where cattle are raised for Tyson’s slaughterhouses, Tyson was among the first companies to aggressively use a little-known growth hormone called Zilmax. The drug causes cattle to put on weight much faster than they would naturally, but it reduces the quality of beef. Because Tyson tightly controls production at vast feedlots, it can use such drugs on an industrial scale without most consumers ever knowing about it. Other companies started using Zilmax to keep up with Tyson, and the drug quietly became the industry standard. Tyson Foods has similar discretion in deciding how much antibiotic drugs called ionophores it will feed to its chickens, or what kind of chemicals it will spray on chicken carcasses at its slaughterhouses to fight food-borne illness.

The standards Tyson uses to raise one out of every five chickens eaten in the United States are its proprietary secret. Consumers can’t cast a vote at the grocery store, choosing chicken with a lighter or heavier dose of antibiotics in its feed, for example, because the recipe for producing that chicken remains entirely hidden to them. Consumers would not even know if Tyson itself raised the bird because most of the company’s meat is unlabeled.

For all its power over the meat supply, Tyson escapes the news coverage it deserves because from a Wall Street–centric perspective, Tyson looks pretty boring. There’s no such thing as a day when Tyson Foods delivers an earnings surprise and moves the markets. No one is waiting for the company to introduce the next iPad, or make some sort of stunning merger or acquisition (itself a sad testament to the fact that Tyson has no one left to buy). Tyson is a Fortune 100 company that feeds most families, but that’s the single thing that it does day after day, in a quite predictable fashion. There’s nothing especially innovative happening, and no expectation that there ever will be. The company’s stock ticker symbol, TSN, just slowly crawls around and around each day at the bottom ring of everyone’s circle of concern. It hovers near the same level where it’s been for years, with a value that neatly mirrors the nexus between the price of corn and the price of wholesale meat at the butcher shop.

But the view of Tyson looks different when you’re at the bottom, looking up. And that view provides the more accurate picture. Because Tyson doesn’t really exist on Wall Street. It doesn’t exist in the studios of CNBC or even at Tyson’s own headquarters in Springdale. Tyson exists within its footprint of slaughterhouses, feed mills, and farms. It lives in the widely dispersed network of industrial fortresses, like the Tyson complex in Waldron and other isolated towns like Berryville, Arkansas; Dexter, Missouri, and Broken Bow, Oklahoma. In these places, Tyson is the center of economic gravity. In these places, it is revered and feared. It provides the jobs. It provides the tax base. If Tyson ever closed up shop, the town itself would evaporate.

This is power, very real power, and it can be felt only by visiting the far-flung places Tyson calls home. The power is etched into the fretful face of men like Edwin, who once tended to the industrial-sized flocks of birds that Tyson owns. Edwin is a polite man, a country man, and so was willing to sit on a bench in his front yard and entertain questions from a reporter. But Edwin was too scared to give his name, too scared to share his phone number. And that was back in 2004, when things were good for Edwin and his wife and kids, well before the fainting spells that Edwin blamed on the fumes in the chicken houses where he worked every day. Well before Edwin lost his farm and got divorced. This was before all that, when Edwin’s life was about as stable as it was going to be. Edwin was willing to talk anonymously about the diseased birds Tyson gave him to try and raise, and how they died en masse and left him losing money with each new flock. But he was mortified at the thought that his story might end up in a newspaper.

Tyson’s power could be felt several miles down winding country roads from Edwin’s farm, at a small house where an elderly woman answered the door. She was also polite, and she stood out on her front porch to entertain questions. But her face zipped closed when Tyson’s name was brought up. Her son worked at the Tyson plant. She didn’t want to talk about the company. There wasn’t anything around but green hillsides and fresh country air, not a person to overhear what she might say. But it was as if a Tyson field technician were sitting right there on her porch, in his trademark khaki uniform. She’d talk about anything in town except Tyson, insistently fending off any questions about the company until the painful encounter was over and she went back inside.

When a reporter knocked on the door of a Tyson field veterinarian in a small town in rural Missouri in 2009, the man came outside to talk. His wife joined him, then his children. The reporter might as well have been a federal agent in the age of Prohibition, poking around rural enclaves and asking residents how they made their money. The message was clear, from both the field tech and frigid stares of his family: Go away. Get off this property. Stop asking questions.

At its heart, Tyson’s power is economic, and it has used this power to redraw the laws of wealth and income in rural America. The way the company is structured has done more than revolutionize how meat is produced. It has also fundamentally altered the way money is distributed in America’s Heartland. This fact is difficult to discern by simply visiting the towns where Tyson operates. The run-down streets of Waldron and the shabby farms in surrounding rural Scott County help perpetuate a peculiar American stereotype about farming: that it is a hardscrabble business defined by thin profits and economic volatility. The financial decline of farming towns has become an accepted fact of American life, and the economic plight of farmers (who seem to complain incessantly about their low prices, high debt, and the ever-present threat of bad weather) is now considered a kind of inescapable destiny. The American farm and the small towns it once supported, the thinking goes, have died over the last fifty years because there’s no money to be made in a largely backward-looking business.

This would be a sad thing, if it was in any way true, but it is not. Farming is immensely profitable. The agriculture sector is one of the richest, most productive moneymaking machines in American life. After all, a lot of the business simply involves sitting around and letting plants grow and letting animals get fat. Mother Nature does the heavy lifting. Then the farmer harvests the plants, kills the animals, and watches the money roll in. In 2010 alone Tyson Foods sold $28.43 billion worth of meat and cleared $780 million in pure profit. And that was during a tough year, when consumers were dining out less and scrimping on steaks and the precooked meals that are Tyson’s real moneymakers. Other agriculture companies did just as well.

The critical question isn’t whether there is money in agriculture, but rather where the money goes. It certainly doesn’t go to places like Waldron. On Saturday night, Waldron’s Main Street is quiet to the point of abandonment. The new strip mall at the southern end of downtown is vacant, with lumpy black garbage bags peppering its empty parking lot. The sole locus of activity is the renovated Scott County Movie Theater, which draws a crowd for its single screening of the night. A young woman named Frankie Watson takes tickets, chatting with the clientele. Watson takes cash from a young couple, no older than teenagers, and the shy blond girl mutters something toward the window.

“What?” Frankie asks.

“I found out I’m pregnant,” the blond girl says louder, no note of particular urgency in her face. The boy with her smiles faintly.

“I knew it!” Frankie exclaims.

“I didn’t know it,” the girl says over her shoulder as she walks inside the theater. Moments like this have kept Watson and her husband in Waldron, even though they probably should have done the sensible thing and moved out of town to find a job, as many of her grade-school friends have done. Instead, they renovated the city’s theater, gutting the moldy insides that had been empty for years. The weekend shows make enough money to pay the bills. The Watsons thought of Waldron as home, and so they wanted to stay there, even if it meant earning far less than they could easily find just an hour north in Fort Smith. The people are so poor in Waldron, Watson said, that the Great Recession of 2007 and 2008 largely passed them over, unnoticed.

If the money isn’t circulating in places like Waldron, if it isn’t in the hands of Frankie Watson or the teenagers who visit her theater, then where is it?

The money is riding on a one-way current. It is generated in the churning machinery of Tyson’s slaughterhouse: Cash is minted along the conveyor belts carrying chicken carcasses and in the industrial ovens where chicken patties are cooked and breaded. But the money exists for only a moment or two within Waldron City limits. Almost as soon as it’s created, it rides a current north to Springdale, to the treasury of Tyson Foods. It stops there temporarily and some of it is doled out to workers in the black steel-and-glass office buildings. Then the current carries the cash to Wall Street, which acts as a post office address for Tyson’s owners. These owners are mostly big institutions and shareholders, and Tyson’s profits stay with them.

Tyson’s structure, and its dominance over all aspects of the rural economy, has delinked the corporation’s well-being from the fortunes of the towns in which it operates. The average per capita income in Waldron and surrounding Scott County has stagnated in Tyson’s shadow, growing just 1.4 percent over the last decade, to about $22,000. During that time, Tyson’s annual income rose 245 percent. The same pattern is writ large across other communities where the company operates. While Tyson profits, rural America treads water and consumers pay more for their food.

Tyson’s power has become entrenched over decades, as Democratic and Republican administrations traded places in Washington. But the economic malaise of rural America caught the attention of a young presidential candidate named Barack Obama as he spent months campaigning in Iowa during 2007 and 2008. In towns like Council Bluffs and Storm Lake, Tyson’s economic power is a fierce and partisan political issue, a fact that did not escape the Harvard-trained lawyer from Chicago. When Obama was elected, he named Iowa’s governor, Tom Vilsack, to the post of secretary of agriculture, and he told Vilsack to take action on the concentration of power among a few giant agribusiness companies. Unlike a parade of agriculture secretaries before him, Vilsack actually took up the challenge. The U.S. Department of Agriculture proposed the toughest antitrust rules over meat companies since the Great Depression. The USDA has held a series of workshops with the U.S. Department of Justice, with Vilsack and Attorney General Eric Holder traveling to places like Normal, Alabama, and Ankeny, Iowa, to learn more about Tyson’s power. The workshops were the biggest effort in decades to find a legislative prescription for the ills of highly concentrated corporate power over the U.S. food supply.

In retrospect, the Obama administration seems almost naive in the way it attempted to reform the meat industry. The series of workshops were launched with soaring rhetoric about the creation of a new food system and new rural economy. What the administration did not seem to anticipate was the organized resistance it would face from Tyson Foods and other multinational meat corporations. The companies were not enthralled by the promises of change. Instead, the corporations marshaled millions of dollars and teams of lobbyists to help turn back the biggest effort to reform the meat industry since the 1930s.

The system that Tyson pioneered is now entrenched in the American economy and American way of life. Tyson’s corporate culture became small-town America’s corporate culture while no one was paying attention. There have been benefits to this but also deep costs. If America’s consumers and farmers cannot rid themselves of the system that Tyson has imposed on them, they are at least entitled to understand the company, and to see it from the inside.

From The Meat Racket by Christopher Leonard. Copyright © 2014 by Christopher Leonard. Excerpted with permission by Simon & Schuster, a Division of Simon & Schuster, Inc.

Featured recipe

Top Recipes

Featured recipe