Letter from Langdon: Tournament Time

 "Tournament" sounds like an all-American competition where everyone has a fair chance at coming out on top. But in the chicken-raising game, corporations win every time. Where's the ref when you need him?

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Another word for tournament is competition.

That’s why it seems odd that our fully integrated monopolistic poultry industry, made up of a few competition-averse multinational corporations, has adopted a tournament system for their contract growers.

And by the way, corporations don’t apply tournament rules to themselves.

Under the tournament system for contract growers, integrator companies – the huge poultry corporations – set a baseline of performance for contractors – the farmers who actually raise the chickens. Contractors whose chickens get bigger faster receive a bonus that is paid for by deductions from other growers pay.

Healthy competition is good. But this isn’t healthy. That’s because the real competition among contractors is for the esteem of the company. That esteem can mean healthier hatchlings, higher quality feed, more advantageous load out times. And that results in higher scoring in the tournament.

Growers are all required to supply land and build and maintain similar buildings and equipment in accordance with integrator policies. Integrators provide birds and feed, determine timetables for deliveries and pick up, mandate upgrades to facilities that growers must pay for, and hold grower meetings to indoctrinate them in company policy. The company decides who has a contract, and it decides if contractors keep their contract. It sets the performance baseline and is the sole decider of how well each grower did. There are no government standards for the way growers are reimbursed and no government oversight to assure fairness.

And growers never see the data used to score them and their peers.

Integrator corporations say there are enough of them for farmers to switch. The government says so too. But nailed to the ground, farms can’t be moved, and integrators for the most part don’t compete in the same regions.

How can a farmer with fixed assets relocate his business?

Success or failure is measured in terms the company sets with virtually no transparency about information the company uses or how they reach their conclusion. Growers just have to take their word for it.

There are big differences between the poultry industry’s tournament system and more traditional farm competition practices.

When farmers work for themselves, they choose what to grow and how to grow it, what facilities to build, how much money to borrow. Then they sell into markets where prices reflect demand, quality, and quantity. They get to choose those markets themselves.

No one is perfect. Farmers can be our own worst enemies – like when we grow too much wheat or corn, or raise too many livestock when demand is slow. Or maybe we all decide to sell on the same day creating a glut. Sometimes it’s no one’s fault, like weak consumer economies or the weather. That’s the way it was in the Great Depression when pork was so cheap farmers set hogs free to roam because consumers were broke. There was no market, and hog farmers couldn’t afford to feed the pigs they raised.

The experiences that farmers learned from shaped farm politics in the early part of the 20th century. That’s when, following passage of the Capper-Volstead Act, besieged farmers banded together to form cooperatives enabling them to pool their resources so they could compete more effectively against corporate trusts and plain old bad luck.

Not all farmer owned cooperatives have survived. One of the biggest to fail was Kansas City-based Farmland Industries. Forced into bankruptcy, Farmland’s diverse holdings were split among buyers with its pork business going lock, stock, and barrel to Smithfield Foods, now owned by the Chinese-government-backed corporation, Shuangui Limited. Its fertilizer business was acquired by Koch Industries.

Noted afterward was the fact that Farmland’s assets were worth many times more than their debt. They simply lacked cash needed to operate.

The other side is of the coin is one of agriculture’s biggest success stories, CHS, Inc (Cenex Harvest States). It’s the largest co-op in America and 10th largest in the world, on Forbes’ 100 list of largest American companies.

Perhaps best known to consumers is the cranberry-famous farmer owned co-op, Ocean Spray.

Other agricultural cooperatives have succeeded beyond their founders’ wildest dreams. With 33,000 employees, Ohio Farm Bureau Mutual is one of those. Now known as Nationwide Insurance, it has a value of over $153 billion.

Co-ops like these may not resemble the first startups sponsored by their founding farmers. But they point out the successes farmers can have when they are allowed to compete.

They also show the power, prestige, and money involved in competition … or lack of it.

How did farmers lose their say in hogs and poultry? It’s simple. Our government stopped enforcing the law. Now the income those markets produce are under the sole control of a handful of big corporations who don’t share the wealth the way farmer owned co-ops do.

That wealth can be passed around in more ways than one.

Not all farmers receive patronage dividends from their co-ops. Even if they don’t get a check in the mail, cooperatives give farmers the opportunity to compete against other businesses many times their size. When antitrust enforcement at USDA and the Department of Justice became obsolete, family farmers were set on a dusty shelf alongside laws meant to protect their livelihood.

Now corporations in control use part of their wealth to lobby Congress for even greater power.

But the money they use to influence government isn’t theirs.

It’s money family farmers don’t receive for doing their job.

Richard Oswald, a fifth generation farmer, lives in Langdon, Missouri, and is president of the Missouri Farmers Union.

 

Topics: Ag and Trade
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