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Talking Under Contract with Sally Lee

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Talking <i>Under Contract</i> with Sally Lee

Americans eat a lot of chicken, around three times more than in the 1960s.

Around 25 thousand farmers produce 50 billion pounds of chicken, adding up to $30 billion dollars worth of meat. It’s big money, but the farmers raising the birds are some of the poorest and most disadvantaged in the agricultural industry. About 97 percent of chickens consumed in the United States are produced by multinational integrators like Tyson, Perdue and Pilgrims Pride that source out the actual farming under unfair contracts that saddle independent farmers with debt. These farmers invest massive amounts of money into infrastructure—one chicken house costs over $1 million—and are often forced to pay for expensive upgrades.

Last month, Rural Advancement Foundation International (RAFI) held a preview screening of its new film at Farm Aid. Under Contract outlines the issues faced by chicken farmers in the United States and across the world, highlighting the unfair contracts, continuous cycle of poverty and total absence of justice.

We spoke with filmmaker, Sally Lee, contract agriculture reform program director for RAFI-USA about the film and the state of the industry.

Paste: Let’s start from the beginning. What is RAFI?
Sally Lee: RAFI is an organization that goes back almost 75 years. We’re a nonprofit. Our mission is to support farming communities in many different ways. We offer direct support to farmers in crisis and advocate for policies and regulatory change that would support farmers, so we have a world with a thriving, sustainable agriculture system. Since 1983, we’ve had contract agriculture reform program. A poultry farmer came in the door and said, “Do you guys understand what’s happening with livestock farming?” Contract farming pits farmer against farmer. It’s incredibly unfair and exploitative of farmers, and it gives the benefit of farmers’ hard work to big companies.

Paste: Why did RAFI make the film?
SL: While working at Food and Agriculture Organization of the United Nations, I encountered people who were saying contract agriculture is a great way to connect farmers to the growing global market and it’s good for economic development. I was shocked. At RAFI, I had worked with farmers who told us these contract horror stories that they just can’t get out of. This disconnect made me want to study it more. Agriculture economists, companies and governments are moving toward contract agriculture because it’s considered a more efficient, technologically advanced system. It’s not working for farmers. It’s always been hard to tell this story to the public, because contracts are an issue that typically make people’s eyes glaze over. Since I was going to be driving around to do this research, this would be a way to get these farmers on tape. It’s more than a story about chicken farmers in the southeastern United States; it’s about a transition in agriculture, in which farmers are losing power to corporations.

Paste: Why do farmers get into these contracts?
SL: A lot of folks sign these contracts because they believe the company when it tells them they could have a lifestyle they want—rural, working from the farm. The core of the reason people sign contracts is because they’re told it’s going to work out great. The materials farmers get from these companies, like cash flow sheets, often do not include actual expenses. The people who come out to farmer’s houses, say, “If you buy these chicken houses, these are going to be good for 15 years.” Three years later, the company sends out a letter demanding updates. There’s a lack of transparency.

Many want to add something to existing farms for their kids, but they can’t afford more land. Chicken farming is sold to them as a great way to do that. It’s pitched to beginning farmers as a way to get into farming without existing infrastructure. They can get a loan for this like you can’t for other things, because the USDA Farm Service Agency (FSA) guarantees the loans.

Paste: The film explores the unfairness of contract farmers pay scale, the tournament system. Why is it such a problem?
SL: Basically, there’s a pie and what you’re doing is competing for a different sized piece, but the pie never changes. The way it’s sold is as honest competition: you work hard, you’ll get a bonus and if you’re a bad manager you’re not going to make a lot of money. In reality, it’s a gamble. The farmer’s piece can fluctuate by thousands of dollars. In the tournament system, if you have fewer chickens, you’re ranked lower in the tournament. So, you get hit twice. It is designed so that even if everyone is doing really well, half will come out under base pay.

There are so many company decisions that dramatically impact your success. Companies don’t compensate farmers to make up for the difference. If say, the chicks had a disease, the company just lets that go. Farmers are shock absorbers for biological and production risks, so the company can control costs. The best analogy is from farmer Craig Watts: “In an honest competition you’re starting the race at the same point. In the tournament system, if the company does something wrong, it’s like you’re starting that race 10 yards behind everyone else.”

Paste: In the film, you interviewed numerous farmers, one of whom tried to sue Tyson for discrimination, but the case was dismissed. What happened?
SL: Alton Terry from Tennessee sued Tyson in 2009 [for unlawful retaliation]. Terry suspected that his birds weren’t being weighed properly, so he followed the Tyson truck to the plant to see. He wasn’t allowed in. So, he filed a complaint with Grain Inspection, Packers & Stockyard Administration (GIPSA), the agency that is supposed to send someone out with the farmer to oversee the process. Afterward, Tyson withheld a flock from Terry, and a manager told him, “We did it because you complained.”

Terry put that into his legal complaint, but it was thrown out because he couldn’t prove that what was happening to him and his complex was competitive injury. (Legally defined, “competitive injury” is a price difference designed to harm competition.) In Terry’s case, the judge said, sure, you were being retaliated against, but there’s no proof of antitrust.

On the books, the only law that protects farmers is the Packers and Stockyard Act. It lays out practices that would be illegal in the industry, such as deceptive and unethical business practices. Farmers that try to bring a case against a packer like Tyson using the Packers Act have been blocked from using this law because some federal judges have begun interpreting it in such a way that if every element of law is not used, a case could be dismissed. Currently, suits have to demonstrate antitrust (aka competitive injury) through the entire industry.

After years of being blocked, GIPSA finally has the mandate from Congress to finalize rules that would actually give some teeth to the Packers Act they administer. One rule is farmers will no longer have to prove competitive injury in order to bring a case against an integrator. If farmers can bring cases for deceptive business practices without having to prove competitive injury every time, it would be a huge step forward because it would give farmers access to courts.

Paste: Why has GIPSA been blocked for so long?
SL: There has been a battle for years. In the 2008 Farm Bill, Congress mandated GIPSA to oversee these rules. Those rules came out in 2010. Then, in 2011, industry lobbyists managed to get a rider put into the Federal Budget stating that no money could go to finalization of GIPSA rules or implementation. Last year, John Oliver called out lawmakers who supported the GIPSA rider in the budget process. He used some of our footage for the segment. They were embarrassed, so that year GIPSA was finally able to start up its engines. By the end of this year, GIPSA says it will finish the process and establish rules.

At the same time, we’ve been begging congress not to pass this rider again. There’s a lot of lobbying in livestock that happens on the Hill that makes it really hard for farmers to get justice. At the end of 2016, we should have rules. Then what we’re expecting is that some will be final and some will be proposed again. We’re looking to the USDA and GIPSA to implement the rules that have come out final. We’re hoping for improvement, even in increments.

Paste: That’s impressive that John Oliver was able to instigate that change. But, what’s the solution from here?
SL: There are several because there are several things that are broken. We need regulations on contracts with new GIPSA rules and USDA enforcement, and we need international regulations on farmers’ rights and contracts. I think this is going to be a big part of a sustainable global economy, to avoid turning farmers into a peasant class.

Another is fair contracts, not having an unfair tournament system, having a base pay that covers the cost of production. Cooperatives would be the best model for a solution—even in a conventional market, a moderate change is totally manageable with profit sharing, fair contracts and fair payment.

Several studies on return on investment show that, over time, farmers make a negative ROI, losing money in the long run. In cooperative profit sharing, if you invest $2 million, you don’t expect minimum wage, you expect to grow. Farmer advocates and even bankers have told farmers, you could get a job at McDonald’s and do better. Unfortunately, they don’t tell this to all farmers.

Under Contract will be publicly downloadable on February 1. Lee and her team will be hosting a premier event in New York City sometime this winter as well as screenings for farmers at town halls throughout the Southeast.


Sara Ventiera is a roaming eater and traveler who looks for amusing stories across the United States. She works from New York, Los Angeles and various places in between. Her work has appeared in The Village Voice, New York Daily News, Zagat, FoodNetwork.com and more.

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