About Contract Poultry Farming
We need all of our contract farmers and want them to operate successfully.
Tyson Foods supplies birds, feed and technical advice, while the poultry farmer provides the labor, housing and utilities. This means the farmer is insulated from the risk of changing market prices for chicken and feed ingredients such as corn and soybean meal, which represented 69% of the cost of growing a chicken in 2012. In other words, farmers are ensured of a stable compensation for their efforts, no matter what the feed or grocery markets are doing.
We’ve had periods in the last five years where our company’s poultry margins were negative. Because of the contractual arrangements we have with poultry farmers, they were still making money while the company was losing money on every bird they raised.
We’ve been working with poultry farmers on a contractual basis since the late 1940s and it’s been a relationship we believe has worked effectively for both the farmer and the company. There are currently more than 4,000 contract farmers who raise chickens for our company. We frequently receive inquiries from additional people interested in raising chickens for us.
Chicken farming is like any other business; people generally have to borrow some money to start or improve their operation. Each farmer must decide on their own how much debt they’re willing to take on. We don’t make such decisions for them. However, we do provide financial incentives – more pay – to farmers who decide to upgrade to premium housing.
There’s been a major shift over the past 10 to 15 years in the type of housing used by poultry farmers. Most have converted to premium-style housing in recent years as part of the continuing need to remain competitive. They’ve moved from conventional barns with open, curtain-covered side walls to premium housing with solid side walls and computer-controlled ventilation and heating. The benefits of modern housing include a more comfortable living environment for the birds with improved ventilation and more uniform temperatures through the barn. Another benefit is energy savings.
Chicken processing also requires re-investment. That’s why Tyson Foods is continually putting money back into our plants to keep them operating efficiently.
The way we pay farmers is no secret, since it is clearly outlined in their contracts with our company. In general, the amount farmers are paid is based on the feed conversion efficiency of the birds they raise. The payment formula includes such factors as the number of birds, the amount of feed used, the performance of their flock compared to those raised by other contract growers, and the weight of the birds delivered to the processing plant.
The poultry processor-farmer relationship is extensively regulated by federal law. For example, by law growers are entitled to:
- A written copy of their contract with the poultry company
- Information detailing how much they are paid
- Information explaining how a contract can be cancelled
- Right to a 90 day written notice of the processor’s intention to terminate the contract
- Right to terminate the contract with the processor by giving a 90 day written notice.
- Right to discuss their contract with outside parties
- Right to join an association of growers