Apparently, as a prerequisite for approval of the acquisition of Sanderson Farms by the Cargill and Continental Grain consortium, the re-structured combined company, Wayne-Sanderson Farms, agreed to cease penalizing sub-standard contractors applying the tournament system. This well-proven and effective approach to contractor payment rewards diligence manifest as superior performance and detracts from grower payment for results falling below peer standards.
Secretary of Agriculture, Tom Vilsack, has consistently promoted abolition of the tournament system, stating, “We are on the side of the hardworking producers. We are on the side of the farmer out there who is taking financial risks and who needs to be treated fairly.”
CHICK-NEWS has frequently questioned the business acumen of the Secretary and his understanding of the broiler industry. Effectively, integrators bear the financial risk of fluctuation in feed and other inputs and the vagaries of the marketplace, Contractors are protected from these realities. Tyson Foods posted an operating loss of $258 million for the second quarter of Fiscal 2023. Irrespective of the financial result posted by the largest broiler integrator in the U. S., contractor payment during the quarter was not affected.
Integrators own the flock, providing chicks, feed, transport and technical support. Farmers supply housing with federal guaranteed loans, utilities and their labor. For more than seven decades, the system has worked to the mutual advantage of integrators and contractors and indirectly, also consumers who have enjoyed an available a supply of inexpensive protein.
Does Secretary Vilsack wish the broiler industry to transition to the U. K. model? Broiler farmers in this Nation are going out of business because they are unable to generate positive margins on their flocks. This is attributed to an escalation in feed cost coupled with low prices paid by packers. This intermediate in a fragmented industry is faced with intransigence by the supermarket chains with respect to fair payment.
The U.S. broiler production model has evolved to the benefit of all stakeholders. Secretary Vilsack and his acolytes should first understand the structure and economics of the industry and then calculate the damage they could cause by disturbing proven methods of conducting business. Farmers have protection through GIPSA regulations that allow for processing and remediation for proven cases of exploitation or improper or unethical practices. The fact that most integrators have a waiting list for aspirant contractors suggests that the system works to the advantage of both parties.
Given the uncertainties relating to the economy, despite easing inflation, demand is not rising in proportion to expansion in production. Domestic sales and international shipments are relatively stagnant, and integrators will experience potentially higher costs for interest, feed, overhead, fuel and wages. The April 2023 Poultry Production and Value Summary for 2022 indicates $50.4 billion value for broilers produced, up 60 percent from 2021 with 9.2 billion birds processed. This is far too large an industry to disrupt with well-meaning, socialist-inspired meddling.