How much do you really know about the chicken on your dinner plate? Journalist Christopher Leonard, author of The Meat Racket: The Secret Takeover of America's Food Business, spent more than a decade covering the county's biggest meat companies. [Read an excerpt.]
Large companies such as Tyson Foods have "chickenized" the meat business. By controlling all stages of meat production from the hatchery to the slaughterhouse, Leonard says the companies have taken power away from farmers, cut production and reported record profits. Today, just two companies make about 40 percent of the chicken in the U.S.
Contract farming: 'The farmers have almost no control'
Jennifer 8. Lee: You make a bold claim in your book where you compare farmers in America to serfs. What gave you the confidence to make that comparison?
Christopher Leonard (Photo: Seth Rubin)
Christopher Leonard: It was years of reporting on the ground in the small towns where Tyson Foods operates, where most of the big meat companies in my book operate. A serf was a peasant and the lowest-ranking person in the feudal system of agriculture many hundreds of years ago. A serf didn't really own their own land, and importantly they were tied to a lord who told them what to do.
To be honest, I found a very similar situation when I went to small towns like Waldron, Ark., where Tyson Foods has an enormous chicken production facility and where it contracts out with farmers to raise chickens.
Contract farming is a very interesting structure. You'll have a farmer who will borrow maybe $500,000, maybe as much as $2 million, to build a large industrial footprint of these kinds of factory farms where they can raise 25,000 chickens in a single barn. But for all the size, scale and sophistication of these farms, the farmer never owns the actual chickens that are put into these barns. The farmer contracts with a company like Tyson, and Tyson will come and deliver birds and deliver feed. The farmer is paid to raise animals.
The farmers have almost no control over the most important things in the operation. The farmer has no control over what quality of chicks are delivered to the farm, whether they are healthy or not. The farmer doesn't control what kind of feed is delivered to the farm. So essentially they end up taking orders from a big company like Tyson Foods in the same way a serf might be tied to a lord many, many years ago.
Chicken houses: Passing off 'a rotten investment' to local farmers
CL: Back in the 1960, Tyson Foods was a pioneer in developing this system of contract farming. Tyson really experimented. They had some operations where they would own the farm itself; they had others where they would hire employees to come and raise the chickens. But what they discovered was that a factory farm was an awful investment.
A lot of that can be traced back to the giant barns -- these chicken houses, as they are called -- which are just a rotten investment. The things start to lose value pretty much the day they are finished being built. They are kind of like trailer homes. They corrode in the elements. They serve no other purpose than to raise chickens.
For a company like Tyson, that's a pretty rotten investment. The company would much rather steer its cash into its large slaughterhouses, where it can invest in new machinery that can process chickens much more quickly. Furthermore, there's really only so much you can do in terms of getting a chicken to grow fast. That's not a cost curve you can really bend too sharply.
Tyson and other companies made the decision back in the 1960s that they would go with this arrangement of contract farming. They would entice a local farmer to borrow the money to build those chicken houses and also buy the tremendous amount of land that you would need to go around these chicken houses to absorb some of the chicken litter. Tyson would effectively control the farm without owning it. That rotten investment would be on the balance sheet of the local farmer.
'When a business becomes chickenized … farmers become powerless'
J8L: You have this verb: chickenizing. What does chickenization mean?
CL: When you spend a lot of time going around small towns in rural America where raising meat is still the economic bread and butter, the phrase chickenization is actually a pretty loaded political term.
At its most basic element, when you call a meat business chickenized, what you are saying is that it is vertically integrated or very tightly integrated. By that I mean a company like Tyson Foods will own all of the components of raising meat that used to be a small business in small-town America. Tyson Foods will own the hatchery, it will own the feed mill, it will own the slaughterhouse, it will own the company that breeds birds, it will own the trucking line that ships the birds back and forth and ships the meat out to a warehouse.
That integration is at the heart of chickenization, but the word means a lot more than that. When a business becomes chickenized, it essentially means farmers become powerless. Transparent markets are replaced by contract arrangements and companies get a tremendous amount of control over the business.
I think maybe the best example when people talk about a business being chickenized would be the pork industry. Thirty or 40 years ago, the pork industry was still defined by a lot of independent operators, a lot of midsize small operators. You had a really vigorous, transparent market where hogs were traded. It made a lot of money for a lot of people. I interviewed attorneys in Iowa who were put through law school on hog money.
But the business was chickenized over a period of 20 years. Big companies came in and effectively took it over. They replaced the markets with contracts and farmers lost autonomy, so they were effectively chickenized. That's what the word means.
'The art of raising chickens': Bigger chickens, shorter time, less feed
J8L: If you go back in American history, we were not a big chicken-eating country a century ago. But that's changed in the last couple of centuries. What happened and what role did Tyson play in that?
CL: It really goes back to the late 1920s when Tyson Foods was founded by this young, brilliant man named John Tyson. He had been kicked off his family farm during the Great Depression because there just wasn't money there to make a living.
At that time, chicken was a delicacy. It was like lobster -- it was a pricey meat that a family might purchase for the big Sunday meal. You would buy a whole chicken, but the meat was pretty expensive.
John Tyson started making a lot of money shipping chickens from Arkansas to urban markets in St. Louis or Kansas City, for example. But the business grew from there as farmers in the South started getting a lot smarter about how to raise chickens. People like John Tyson created the system I'm talking about, which is a vertically integrated one where they control the feed and other inputs. They just became experts at raising chickens.
Between 1955 and 1982, they managed to shave off the time it took to raise a full-grown chicken by about a third; they took 30 percent off the time it took to raise a chicken. At the same time, they shaved off the amount of feed you need to raise a chicken by one-third and they made the birds one-third bigger. It was this incredible revolution.
Between 1955 and 1982, you were able to raise a bigger chicken in a shorter amount of time on less feed. They did this through aggressive breeding -- getting the best genetic lines -- and coming up with really sophisticated feed formulas, for example. They just mastered this art of raising chickens in these giant, sophisticated warehouses with automatic feeding and watering systems.
'These companies have a market power that is unprecedented'
J8L: Despite the fact that a lot of the people who are raising chickens are small farmers, the number of companies that actually control what gets to your plate is fairly small now. What happened?
CL: That's right. That's one of the most significant changes in this business.
I interviewed Don Tyson and his close confidants and lieutenants who built the company. Their goal was really clear: They wanted to be big. They wanted to be as big as possible because that really helps the company survive and fatten its profit margins in a pretty volatile business.
Don Tyson went on an unprecedented acquisition spree. Tyson Foods bought at least 33 of its competitors -- some of those were major, large chicken companies like Holly Farms. It went from a point where we had a highly competitive chicken industry in the '60s and '70s to a system today where just three companies make about half of all the chicken in the U.S. Just two companies make about 40 percent of the chicken in the U.S. The impact of that is significant and it's serious for consumers.
In 2008, Tyson Foods really hit a rough patch. It was the kind of rough patch they had hit all the way back to the '60s when prices for chickens went down, but prices for feed were still high. So what Tyson did to react to that was to cut production. That's a natural reaction, right?
The difference between 2008 and 1961 is that Tyson Foods controlled almost 25 percent of the market. Back in the '70s, companies would have to meet, collude, have secret meetings and plan production cuts to achieve the same kind of production cuts that Tyson could do in 2008 with a simple order from the central office.
These companies have a market power that is unprecedented in the U.S. It gives them a strong lever over the meat industry, and the results have been really clear. Tyson was able to cut production. It has done that many times since 2008, and its profits are rising. It reported record profits last year even as meat prices go up.
Consumer choices: 'The most expensive option for people … is to simply opt out'
J8L: Let's say you're a chicken-eater like I am and you are really bothered by how this system has evolved. Is there anything we can do as consumers? Is the answer not to eat chicken, to eat less chicken or to eat organic chicken? What choices are out there?
CL: Certainly everybody has to make that decision for themselves. I eat chicken and I do not advocate a vegetarian diet, although I really understand why some people do that. I understand where they are coming from. I just do think chicken is an affordable source of healthy protein.
I think the most expensive option for people out there is to opt out of this system. There's a really vibrant locavore movement where you can go to a farmers market where a local farm will sell chicken on a subscription basis. You know exactly where that chicken is raised, 100 percent of the food dollar you're spending goes to the farmer. But that's expensive: I think it's about three times as expensive. That is asking a lot of consumers.
I'm writing about the meat that is delivered to hospitals, cafeterias and grocery stores. Most middle-income Americans can't afford to buy meat at the farmers market. Unfortunately, there's not an easy fix.
'Part of the solution probably has to be political'
CL: What we're looking at is a system that has basically gone back 100 years to being in a state of oligopoly, where a few companies have tremendous market power and competition has dwindled significantly.
I think part of the solution probably has to be political. When you look at the landscape, what entity can curb the power of a corporation that has almost a billion dollars in profit? I think federal antitrust authorities are about the only people in the landscape who can help curb some of the market power that these companies have been given.
J8L: Your book actually did hail some of the efforts the Obama administration made toward doing that, but the results have been mixed. What happened when they started trying to make policy changes around agribusiness?
CL: Barack Obama came into office advocating some very sweeping changes and some very strong antitrust efforts on this front. He hired a lot of people into the U.S. Department of Agriculture (USDA) who had seen firsthand a lot of the problems going on in chicken farms and in rural America.
They held a series of unprecedented workshops around the country where the Department of Justice and the Department of Agriculture had joint hearings on this problem. You had Secretary of Agriculture Tom Vilsack seated right next to U.S. Attorney General Eric Holder listening to farmers talk about a lot of the stuff that is in my book.
It was an unprecedented effort, but it seemed like the administration was almost surprised when the meat industry put its lobbying machine into effect and started fighting back on these rules. What resulted in 2010 and 2011 was a truly inept, dilatory, ineffective effort on behalf of the USDA. They ended up backing off the vast majority of the reforms they had proposed.
Other reforms were defunded by Congress, where the meat lobbyists spend millions of dollars to enlist legislators to beat back the efforts. Interestingly enough, the meat industry even enlisted contract chicken farmers to write letters asking not to have protections that would have been enacted under some of these new laws.
The effort was broken, abandoned and left behind. Essentially nothing came out of those hearings or the years of hard work, which I think actually left the meat monopolies in a much stronger position than they were before Obama came into office. There was an attempt at reform and it failed, which in effect has legitimized a lot of the practices these companies are undertaking today.