With concentration of power in a handful of companies that operate a contract, it is the weaker link that invariably tends to get exploited. With more than half of the US egg production in the hands of four large companies, contract farmers are a captive lot. It is true that the companies reeling out a contract provide chicks, feed, medicines, veterinary and technical advice, while poultry farmers are expected to ensure land and housing, which is an expensive proposition.
A year after US President Joe Biden announced a $1-billion package to expand meat and poultry processing capacity so as to increase competition and, thereby, reduce retail prices, egg prices have surged. The increase in egg prices — 60 per cent jump in 2022 as per the US Consumer Price Index and 300 per cent in wholesale prices — comes at a time when prices being received by poultry farmers are in steep decline.
“As profits soar, the prices go up in the grocery stores, but the prices the farmers receive go down drastically,” President Biden remarked. With four livestock companies, controlling 85 per cent of the market, forming a cartel and, thereby, monopolising the prices, the markets have been distorted. The result was that the retail egg prices in January had doubled from a year ago.
Nevertheless, since 96 per cent of the US poultry farmers operate under a contract, and given the high expectations from contract farming that economists invariably project, I see no reason why poultry farmers should be getting a raw deal. Considering that contract farming raises the bargaining power of poultry farmers, and also help remove several layers of middlemen, the benefit should flow to the producer and the consumer. But as President Biden acknowledged, the huge profits being taken out by the livestock companies was primarily the reason behind rising food inflation, and on the contrary had hit both the consumer as well as farmers.
For instance, Cal-Maine Foods, which controls 20 per cent of the US retail egg market, raked in gross profits that soared by 600 per cent in a quarter. While the company’s profits increased to $198 million in the quarter ending November 2022, and even with a huge jump in sales, up by 110 per cent, and driven by the spike in egg retail prices, the benefits did not trickle in the same proportion to the producer. The CNN called it ‘making more money out of every egg’.
It is not as if a decline in income of US poultry farmers is a recent development. According to the National Chicken Council, when adjusted for inflation, the amount poultry farmers receive by weight is declining since the 1990s. Not only for broilers, a steady decline in income has also hit egg producers. Earlier, Farm Action 2022, which fights against monopolistic control over food and farming, had reported that 71 per cent of the chicken farmers, for whom poultry farming is a standalone activity, were living at or below the poverty line.
With concentration of power in a handful of companies that operate a contract, it is the weaker link that invariably tends to get exploited. With more than half of the US egg production in the hands of four large companies — Tyson Foods, Pilgrim’s Pride, Sanderson Farms and Mountain Farm — contract farmers are a captive lot. It is true that the companies reeling out a contract provide chicks, feed, medicines, veterinary and technical advice, while poultry farmers are expected to ensure land and housing, which is an expensive proposition, and also day-to-day maintenance of the poultry birds for which they are paid.
The companies have now launched a ‘tournament system’ under which the efficient farmers who raise healthiest chicken are awarded but the soaring point is that even award money is deducted from the share of farmers who happen to be laggards.
Contracts ensure farmers get assured wages and a guaranteed market but farmers have often complained about low prices, exploitative practices, and how the one-sided contracts are forced onto them. So much so that in 2015, some contract farmers had filed a lawsuit against unfair, predatory prices and the growing indebtedness as a result. Interestingly, two of the major players, Tyson Foods and Perdue Farms, agreed to an out-of-court settlement for $35 million. This shows that the malaise runs much deeper and calls for stiffer regulations. Meanwhile, another class-action lawsuit has been filed by contract farmers in South Carolina.
And as Animal Outlook (September 2022) had observed, “The contract farming system relies on taking advantage of farmers.” Under such circumstances to imagine that an official of the rank of the SDM, like what was proposed in the three Central laws in India that now stand withdrawn, can protect the rights of the contract farmers against the monolithic power of agribusiness giants is simply an illusion.
As a study on ‘Broiler Farming in Punjab’ by Guru Angad Dev Veterinary and Animal Sciences University, Ludhiana, observed that farmers complain of increasing corporate control and unfair practices. The big companies have advantage of volumes and have huge institutional finance to distort the markets. The net returns for contract farmers, therefore, have been in the negative. Among its recommendations is the need to allow an aggrieved party to take the dispute to a civil court. Another interesting study ‘Integrated Contract Broiler Farming: An Evaluation Case Study in India’ by the US Agency for International Development clearly shows that independent and non-contract farmers make higher profits than the contract farmers.
Simply put, contract farming in poultry isn’t leading to higher prices for farmers. As both the studies point to it, the contract model of broiler farming only provides a ‘lower but assured return’. This is exactly what the contract farmers in the US are also saying.
In case of layers too, the scenario is equally distressing. Poultry farmers in Tamil Nadu recently protested outside the office of the National Egg Coordination Committee seeking a higher price. The Telangana State Poultry Federation estimates that farmers are losing around Rs 7,000 crore every year from low price realisation for eggs. They demand setting up a board, like in spices, to regulate prices.
That is why I maintain that any agreement under the contract model of farming, and irrespective of the number of years of the contract, should be based on a mechanism that guarantees a price equivalent to MSP (minimum support price) or above. Guaranteeing a price under contract farming will ensure an economically viable livelihood.
Source – tribuneindia
