Imagine you are the owner of a sports team.
If you beat the brains out of the competition and win a title, the league can choose to reward you with additional TV appearances that result in more money in your pocket. On the other hand, if you finish dead last, the league can choose to not only drop you off the TV schedule but reduce your team’s revenue sharing.
For its part, the league is perfectly happy with the arrangement, believing all its member teams will be forced to play harder, as well as invest heavily in infrastructure — stadium improvements for example — to avoid finishing at the dreaded bottom.
Then why would anyone want to own a team with those kinds of risks and rewards? Who would do such a thing?
Welcome to chicken farming.
As it turns out under Big Poultry’s tournament system producers who fail to meet production goals receive deductions — call them fines — in their base pay. Those dollars are then funneled to producers who exceed production goals.
If that’s not enough that Big Poultry controls all the inputs, determining which of their chicken producers get the best feed and most desirable chicks. And poultry companies can dictate to individual chicken producers the need for facility upgrades.
It is fairly obvious that competent chicken farmers who get the best of everything have a competitive advantage and are more likely to win tournaments — and be rewarded by Big Poultry with cash attaboys. If you grow the biggest chickens in your group you get a bonus. If your chickens are scrawny, you get penalized.
In a tournament system Big Poultry can stack the deck, giving favored chicken producers a head start over their less fortunate rivals. Big Poultry has been developing and tweaking the tournament system ever since the 1948 Chicken of Tomorrow contest.
The Biden Administration is attempting to make chicken farming, and for that matter competition across all businesses, more equitable.
Last November, USDA finalized a rule requiring poultry companies to be more transparent to assist contract poultry growers considering farm investments. That was a baby step in the right direction.
Now USDA is calling for a new rule that would end the ability of poultry companies to deduct from a chicken farmer’s base pay. The rule is largely based on a settlement reached in 2022 between the Department of Justice and Cargill, which was accused of illegally exchanging wage and benefit information.
While the new rule still allows performance bonuses for producers finishing at the top of a tournament, payouts won’t come from producers at the bottom of the group.
The proposed Poultry Grower Payment Systems and Capital Improvement Systems rule also would require Big Poultry to specifically document how they make fair comparisons between individual growers.
It hasn’t taken Big Poultry long to squawk about the perceived unfairness of USDA attempting to level the playing field.
Big Poultry’s mouthpiece, the National Chicken Council, accused USDA of playing politics over the rule proposal. NCC President Mike Brown issued a statement saying, “This is the latest example of the Biden administration racing to impose its anti-business regulatory agenda ahead of November’s election. The administration likes to deflect the blame at our country’s food producers as the reason for high grocery prices, instead of looking in the mirror at their failed policies and increased regulation.”
Brown also postulates the rule will force an undetermined number of top chicken producers out of business. Evidently, Big Poultry doesn’t like the idea of handing out performance bonuses, if it has to come from their pockets rather than robbing from producers missing production benchmarks.
And Brown claims the rule means supermarket shoppers can expect to pay more for chicken. I doubt very much chicken prices will spike if the rule is ever finalized. Public comment on the USDA proposal runs through early August.
What I don’t doubt, is that chicken farmers have, for far too long, suffered under the tournament system. Truth be told the tournament system should be scrapped. Outlaw it. Ban it. End it. Short of that, keep chipping away at the unfairness of it all.
And I wouldn’t be surprised if USDA has a few other proposals up its sleeve to promote a fair, open, and competitive agricultural marketplace. Bring it on.
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