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Changing the Rules on the Family Farm

The small businesses that produce Alabama’s largest agriculture crop are hoping to get some protection against the big businesses they supply.

Jonathan Buttram, president of Alabama Contract Poultry Growers Association.

Jonathan Buttram, president of Alabama Contract Poultry Growers Association.

Photo by Dennis Keim

This could be a benchmark year for the 4,000 contract poultry growers of Alabama, if the USDA finally implements a new set of rules governing how these small businesses—family farms—are treated in their contractual dealings with the big agribusinesses whom they supply.

The most significant rule change would require that the poultry processors—called “integrators”—provide growers contract guarantees in exchange for demands that growers upgrade their operations.

Poultry farming is a $2.4 billion industry in Alabama. Broiler hens are the top crop. The top integrators in Alabama are Koch Foods, Tyson Foods, Purdue Farms, Pilgrim’s Pride, Wayne’s Farm, Marshall Durbin and Peco Foods.

The proposed rules extend to poultry growers the same kind of protections already offered to cattle farmers—rules that are administered by GIPSA, the Office of Grain Inspection, Packers and Stockyards.

A public comment period on the rules began after a workshop held in Normal, Ala. in July, 2010, hosted by U.S. Attorney General Eric Holder and U.S. Department of Agriculture Secretary Tom Vilsack. (See “Brute Forces in the White Meat Market,” July, 2010, Business Alabama.) The Obama administration backs the new rules.

The final rulemaking has been slowed by consideration of 60,000 comments received in the public comment period, say USDA officials.

A threat to implementation of the rules recently came from House members who inserted a rider to the House version of the Agricultural Appropriations Bill for 2012 that would prohibit USDA from spending money to act on the proposed rules. A Senate version of that bill does not have that rider.

We spoke in October about these issues with Jonathan Buttram, president of the 800-member Alabama Contract Poultry Growers Association. He has been growing hens on contract for 32 years, on a farm in DeKalb County.

The integrators got a bunch of their growers to go to Congress, what they called their top 25 percent, and forced them to go door to door telling Congressmen how good they had it. The integrators spent a lot of money and campaigned against us and said it would destroy them financially, which is not going to happen.

It got bogged down. But the last time I talked with Dudley Butler, the administrator at GIPSA, he told us the rules were on the 10-yardline and we’re ready to score. I’ve been doubtful and discouraged, but that does give us some hope. It’s our only hope. For poultry growers to keep their farms, these rules have to go through. There are a lot of people losing their farms under the current situation, where integrators force them to invest hundreds of thousands of dollars upgrading their farms without any guarantee of a long-term contract. Under the new rules, the integrators have to give them an extended contract or pay for most of the improvements themselves.

The other important rule change is that the integrators will have to have a good reason for terminating a contract, no matter how much is owed. As it is now, they could terminate your contract for saying something they don’t want you to say. And it’s hard to get another integrator to pick you up. No other integrator would take you on.

This organization got started three or four times, and each time the integrators came in and terminated all the growers in the organization or scared them to death and out of it. Tom Green started it up first, and they terminated him and 40 more growers. A lot of growers bailed out on them, and Al Ware was president at one time and Tyson basically forced him out. When I was a board member, I told them to stay secretive and grow through the gas cooperative until they were large enough not to be hurt. Now we’ve doubled. We can grow as fast as our gas company grows. And we’re moving on into other states and taking on members, in Mississippi and Tennessee. In the near future, we could form a national association back again. I would like us to be a national association powerful enough to do the lobbying we need to do and strong enough to help.

The integrators haven’t tried to break up our association this time, because we did it secretly and didn’t start going public until the meeting in Normal. The Alabama association is the strongest in the U.S. Other associations don’t have what we have with this gas cooperative. We have a 10-year membership that allows members to buy propane through us from United Propane, in Paducah, Kentucky, and they supply it to us at a discounted rate. Today it’s $1.75 per gallon. Other companies are selling it for $2.00 to $2.29 per gallon. We estimated last year the ACGA saved its members $10 million. That’s why they’re joining up. In 2010, our membership was about 400 and now it’s about 800. If we could get more propane tanks, we could move into Enterprise. They’re not making tanks fast enough.

Beside the GIPSA regulations, one of the main difficulties facing growers right now is insurance. Last year, we were paying insurance of $5,600 per chicken house, and now it’s $11,800, and my insurance has been terminated two times in the last three years. ALFA has gone up tremendously, and they have terminated a major number of growers. AMPAC has pulled out of Alabama, and it’s a real concern to growers: not being able to get insurance on their houses. Part of it is loss from the tornados and the collapses from the snowstorm last winter.

ALFA is proposing an automatic check off, to take money out of each check from the integrators and send it to Auburn University for research and development. They say it is voluntary, but it will not be, since it’s in the contract, and the growers are intimidated so bad they are going to go ahead and sign it.

I’m going to say ALFA is in bed with the Alabama Poultry and Egg Association. The APEA is against the GIPSA rules. Most of the growers in the state have APEA membership dues taken out of their checks. As far as I know, the APEA is actually working for the integrators. I’ve tried to get ALFA to work with us, and they have basically refused. When the GIPSA rules got passed and went to Congress, ALFA took credit for it, even though they had been working against us the whole time. ALFA may be helping the tree growers or the row crop farmers, but not the poultry growers. They have terminated insurance on many houses and increased rates 40 percent and up, and now they are proposing this check off for Auburn.

There is always an increase in demand for chicken, but now it is pretty hard for growers to get the money to build new farms. I don’t know of a bank in my area that will loan money to a poultry grower. You have to turn to a production credit association or federal land bank.

Chris McFadyen is the editorial director of Business Alabama.

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