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Can Delaware’s poultry industry get along?

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Jesse Vanderwende has worked as a contract grower for the last 11 years. His farm in Bridgeville raises hundreds of thousands of chickens from hatchlings to full-grown birds every year. Perdue Farms provides the feed and expertise, and then processes and ships the finished product to supermarkets across the country.

“If I have a question or a problem, they help you work through it,” Vanderwende said. “I never get the feeling that I’m out there fighting for myself.”

Not all growers would agree. In recent years, stories about farmers struggling within the contract system have sparked a national debate. Advocacy groups have rallied for more protections for farmers, and the U.S. Department of Agriculture has stepped in with new regulations designed to overhaul how growers and processors do business. Late-night host John Oliver even did a segment on the industry in 2015 that has since become a viral hit and a touchstone for activists.

“I really didn’t know that feeling was out there,” said Vanderwende, who’s also the president of the Sussex County branch of the Delaware Farm Bureau, a trade group for farmers. “The way this industry is, financially, the processors are necessary for the farmers, and the farmers are necessary for the processors.”

In addition to providing feed and guidance, companies like Perdue determine payment based on how many pounds of chicken are produced for the least amount of money. It’s an intentionally competitive system designed to increase efficiency – but some feel it puts too much pressure on the growers.

“Based on the folks that I’ve talked to, the sentiment of frustration is there,” said Sally Lee, program director at Rural Advancement Foundation International. She added that it can be difficult to find farmers who will speak out against the contract system, as many fear reprisal from their business partners. Her contacts in Delaware, for example, wouldn’t speak on or off the record to a reporter.

Along with the state’s biggest processors, such as Perdue, Mountaire and Allen Harim, a network of independent growers, breeders, suppliers, and shipping companies generate $4.6 billion in economic impact for the state, according to the National Chicken Council and the U.S. Poultry and Egg Association.

Tom Ilvento, a professor of economics at the University of Delaware, helped produce a report 20 years ago on the poultry industry in the state that showed signs of strain long before the USDA got involved or late-night hosts decided to skewer the industry.

More than 50 percent of growers surveyed felt communication with their processor was lacking. A number of growers at the time, Ilvento said, were deeply distrustful and suspicious of processors due to a lack of transparency.

The Farmer Fair Practice Rules, proposed under the Obama administration, were a response to these concerns.

“This is something that farmers have been pushing now for a decade, and multiple administrations have dragged their feet,” Lee said. “They are a baby step towards establishing a level playing field for farmers in this industry.”

Three new regulations are working their way through the USDA. One would clarify the rules around the “tournament system,” which determines compensation for contract farmers. Another would clarify what constitutes an unfair practice or contract term. And the third would make it easier for farmers to challenge a processor in court for unfair practices.

Under current law, the farmer has to prove that the practice causes industry-wide harm – a difficult threshold to meet, according to proponents of the rule. In the meantime, the new Trump-led USDA has delayed the effective start date of the regulation until October 2017.

On the national level, there is a clear split between poultry industry groups, which consider the regulations an intrusion into a private contract, and organizations affiliated farmers, which consider them much needed reform. Here in Delaware, the lines are less clear.   

Delmarva Poultry Industry Inc. (DPI), a regional group that aims to represent both growers and processors, stated that it did not have a stance on the issue.

“No one at [DPI] is at all familiar with what the contracts between growers and poultry companies contain,” said James Fisher, communications manager. “In fact, since Executive Director Bill Satterfield first joined DPI more than 25 years ago, he has never read a grower contract.”

As for the state’s major processors, Allen Harim and Mountaire did not respond to multiple requests for comment.

Perdue stated that it would work with growers regardless of the regulations.

“Our ability to recruit new farmers is dependent upon our relationship in the farm community, which goes back to our first poultry contracts more than 60 years ago,” Mike Levengood, chief animal welfare officer and farmer relationship advocate, wrote in an email.

“Perdue is going to do the right thing, with or without regulation,” he added.

Kenny Bounds, deputy secretary for the Delaware Department of Agriculture, said the state has at least one advantage when it comes to keeping up good relations: multiple processors within a relatively small area, giving growers options when they are not happy with their current relationship.

“We have five companies in Delmarva that are competing for growers’ business,” Bounds said. “We are not a single integrator area, like some of the regions in the country that have had some problems.”

Ilvento points out that while other parts of the country may have less competition spread across a larger area, Delaware used to have even more.

“Over time, it went from over a dozen to now about three,” he said. “There were a lot more, say, 30 years ago, which has happened in a lot of fields. Companies buy out other companies.”

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1 Comment

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    Kimber Ward May 18, 2017

    Good explanation of contract grower integrator relationships


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