Poultry farmers' woes get feds' attention

By Bob Keefe

The Atlanta Journal-Constitution

WASHINGTON -- Production is down, prices are flat and sales contracts are smaller and tougher to come by.

But is the poultry industry -- Georgia's biggest agriculture business by far -- suffering from anti-competitive practices by big food companies, or is it just another victim of the recession?

In an unprecedented inquiry, the U.S. Department of Justice's Antitrust Division and the U.S. Department of Agriculture are teaming up to try to find out.

The two agencies are about to hold a field hearing in the first step to try to discover if big chicken companies such as Perdue or Tyson Foods are hurting small farmers by imposing arduous contracts and tough price constraints.

The May 21 hearing in Normal, Ala., is part of a sweeping examination of competition in the agriculture industry that the two federal agencies launched late last year.

The eventual outcome could mean a lot to Georgia.

The state is the nation's biggest poultry producer. The industry adds an estimated $18.4 billion to the state's economy and directly and indirectly employs more than 100,000 Georgians, according to the Georgia Poultry Federation.

Federal regulators say the field hearings -- they're also looking into the dairy, beef and hog industries -- are more fact-finding mission than full-blown investigation.

"The goal is basically to have an open conversation, an open dialogue about the competition issues and regulatory issues and to listen and learn from all the different interested parties," said Department of Justice spokeswoman Gina Talamona.

But some -- including U.S. Sen. Saxby Chambliss -- wonder if regulators are trying to pick a fight with big food companies that isn't warranted.

As ranking Republican on the Senate Agriculture Committee, Chambliss recently sent a terse letter to USDA Secretary Tom Vilsack warning the agencies not to overstep their authority.

In an interview, Chambliss said he worries the two agencies may be prepping for lawsuits against big food and agriculture companies and using the field hearings to try to get what he called "almost scripted testimony" from farmers as support.

"We've never seen DOJ go into rural America," said Georgia's senior senator. "If there's a legitimate issue, it ought to be talked about. But we don't want DOJ and the USDA going around the country promoting litigation and lawsuits."

What the DOJ and USDA are most interested in is the contract system between big chicken purveyors and family farmers that's been standard for decades.

Under the system, big companies such as Tyson or Perdue provide chicks and feed to chicken farmers, who in turn agree to raise the birds and return them for a set price. By agreeing to upfront contracts, farmers can avoid big market fluctuations.

Industry officials and many farmers say the system works just fine.

"It serves the interests of both parties," said Richard Lobb, spokesman for the National Chicken Council, which represents most of nation's major chicken companies. "It gives the companies a steady supply of chickens, and it gives growers a steady income."

But last month, a jury in Oklahoma issued a $7.3 million verdict against Tyson for using what plaintiffs claimed were deceptive and coercive practices against farmers -- exposing another side of the relationship between farmers and big food companies.

Tyson officials deny any wrongdoing and have vowed to appeal. They say the suit had nothing to do with competition or contract issues in the industry and more to do with how one court in Oklahoma handles lawsuits against big companies.

"The truth is, this is a lawsuit that never should have been filed," Tyson spokesman Gary Mickelson said in a statement. "We have abided by the terms of our contracts with the growers involved in this lawsuit, and we work hard to treat all our contract producers fairly."

There's no denying that -- whatever the reason -- many chicken farmers have had a tough time scratching out a living lately.

Last year, production fell by the largest amount in at least two decades in Georgia. Poultry prices, meanwhile, inched up only slightly while costs for feed, petroleum and other supplies soared.

Leighton Cooley is a fourth-generation farmer who raises chickens under contract with Perdue in Roberta, about 80 miles south of Atlanta.

In the past, Cooley's henhouses were empty 10 or 12 days a year, he said. Last year, it was closer to 21 days. Every day his houses are empty is a day Cooley doesn't make money.

But Cooley has nothing but praise for Perdue. He said it's not chicken companies but the overall economy that's to blame for the tough times in his industry.

"Everybody in the chicken industry has certainly had to tighten up," he said.

Jed Evans, a poultry specialist with the Georgia Farm Bureau, said every grower would like longer, steadier contracts.

"Right now, we've got a lot of farmers on flock-to-flock contracts ... and they're not necessarily sure when they're going to get birds again," Evans said. "They've got houses to pay off and they've got to make their living, and if they don’t have birds, they can't make their payments."

But steadier contracts require a steadier economy, said Mike Giles, president of the Georgia Poultry Federation, which represents both farmers and big companies. He said farmers and companies generally have fairly good relationships in Georgia.

"As far as general issues facing the industry, the economy has been the most important factor," Giles said.

Georgia farms with broiler sales

The number of poultry farms is collected only during the Census of Agriculture, which is conducted every five years.

2007: 2,265

2002: 2,758

1997: 2,478

1992: 2,407

Source: USDA's National Agricultural Statistics Service