The Real Tyson Foods Story

The Real Story

Fiction:

“There is so little competition in the meat industry today that companies like Tyson can virtually raise the price of meat at will.” (Page 3)

The Real Story:

We sell to retail and foodservice customers and do not set consumer prices. We do work hard to produce our products efficiently, so they remain affordable. In addition, Tyson Foods competes against many other U.S. companies as well as food companies in other parts of the world. For example, according to the U.S. Poultry & Egg Association there are almost 40 U.S. broiler companies. As noted by Dr. Gordon Rausser, agricultural economics professor at the University of California-Berkley, “historical consolidation in pork, beef and cattle sectors is explained by the efficiencies it generates: efficiencies that have benefitted American consumers. These benefits are thoroughly recorded in the academic literature, including numerous studies that find minimal, if any, market power on the part of packers and processors.”

Fiction:

“…everything about Tyson Foods seems hidden…” (Page 4)

The Real Story:

Tyson Foods is a publicly-held company and is listed on the New York Stock Exchange. This means we’re required to publicly report a significant amount of financial and operational detail about our business. We have quarterly earnings conference calls with the analysts as well as business reporters who follow the company. We provide extensive information about our business on our corporate website, www.tysonfoods.com. This includes information about the importance of farmers to our company. It's also surprising that the author makes such a claim when, as a reporter covering our company, he was given tours of our facilities, granted interviews with company leaders, and was regularly invited to participate in our quarterly news media calls with senior executives.

Fiction:

“Tyson first pioneered this model (vertical integration) in the poultry business.” (Page 5)

The Real Story:

Contrary to the impression left by the book, Tyson Foods was not the first to develop vertically integrated poultry production. According to the book In Meat We Trust by Maureen Ogle, “Some historians and industry insiders have credited (Georgia businessman Jessie) Jewell as one of the inventors of the modern broiler industry. In fact, he and others were influenced by a similar industry being built at Delmarva…where the borders of Delaware, Maryland, and Virginia meet, where federal and state agricultural experts, bankers and feed manufacturers were helping residents switch to large-scale chicken farming…” Jewell began contracting with farmers to raise chickens in the 1930s and eventually “integrated those chicken growing operations into his larger corporate structure, which included processing plants…mills and hatcheries.” Tyson Foods became fully vertically integrated in poultry production with the opening of its first processing plant in 1958.

Fiction:

“Tyson was among the first companies to aggressively use a little-known growth hormone called Zilmax…Because Tyson tightly controls production at vast feedlots, it can use such drugs on an industrial scale without most consumers even knowing about it.” (Page 7)

The Real Story:

We don’t own any feedlots, so we rely on independent producers to sell cattle to us for our beef business. Some of the independent producers give their cattle government-approved feed supplements to promote efficient growth and provide leaner meat. We don’t require or encourage them to do this. It’s their choice. In September 2013, we discontinued buying cattle given the feed additive Zilmax over concerns it could possibly be causing lameness in some cattle delivered to our plants. According to the manufacturer, Zilmax is not a hormone.

Fiction:

“…Tyson tightly controls production at vast feedlots…” (Page 7) “…meat companies like Tyson controlled the market for hogs. They controlled many of the farms themselves." (Page 204)

The Real Story:

Tyson Foods does not own or operate any feedlots, so we buy cattle from 4,000 independent feeders and ranchers to supply our beef processing plants. We buy pigs from almost 3,000 independent farmers to supply our pork plants in the Corn Belt. We own very few hog farms. Tyson Foods’ equity ownership of live hog operations represents less than three percent of the company’s total pork production.

Fiction:

“The company’s stock ticker symbol, TSN, just slowly crawls around and around each day at the bottom of everyone’s circle of concern. It hovers near the same level where it’s been for years…” (Page 8)

The Real Story:

The value of Tyson Foods’ shares has quadrupled since early 2009 and over the past year (Feb. 2013 to Feb. 2014) has increased in value by more than 60 percent.

Fiction:

“Tyson's structure, and its dominance over all aspects of the rural economy, has delinked the corporation's well-being from the fortunes of the towns in which it operates…” (Page 11)

The Real Story:

Tyson Foods is a significant economic asset to the communities where it operates, spending millions of dollars locally each year on salaries and benefits, payroll, taxes, goods and services, and utilities. In addition, the company is also a major supporter of local farmers, spending more than $15 billion in fiscal 2013 alone to either buy livestock or pay farmers to raise chickens for the company. Tyson Foods and its team members are also major contributors to local charities and community projects. Combining our monetary and product donations for fiscal 2010 through 2012, Tyson Foods has contributed more than $10 million in grants to our communities and various hunger relief efforts.

Fiction:

“The money is riding a one-way current…It is generated in the churning machinery of Tyson’s slaughterhouse…the money exists for only a moment or two within Waldron City limits…” (Page 11)

The Real Story:

Tyson Foods employs more than 900 people at its Waldron poultry complex and depends on more than 150 poultry farmers to supply the business. If you combine the annual payroll, payments to farmers, purchase of supplies and services and local taxes paid, the company has a yearly economic impact of $60 million. This is a significant economic benefit to Waldron, which is located in a county where the vast majority of the property is part of a national forest.

Fiction:

“Decades ago, a big meat-producing town like Waldron…might have contained a small network of businesses that supported and thrived from the local meat industry…Under Tyson, all these businesses have been drawn onto one property…The company controls every step of meat production.” (Page 21)

The Real Story:

The poultry-related businesses in Waldron (e.g. hatchery, feed mill, processing plant) were owned and managed by one company, long before Tyson Foods became part of the community. Tyson Foods bought the Waldron poultry business, which was already vertically integrated and included a hatchery, feed mill and processing plant, from Valmac Industries in 1984.

Fiction:

“The USDA has held a series of workshops with the U.S. Department of Justice, with (U.S. Secretary of Agriculture) Tom Vilsack and Attorney General Eric Holder traveling to places like Normal, Alabama and Ankeny, Iowa to learn more about Tyson’s power.” (Page 12)

The Real Story:

The announced purpose of the government workshops was “to explore competition and regulatory issues in the agriculture industry,” not Tyson Foods. Our company was only a passing mention by a panelist at the Iowa event. At the Alabama forum, one of the invited panelists was a contract poultry producer for Tyson who related generally positive experiences working with the company. Another panelist was a Georgia attorney and long-time chicken industry critic who brought up allegations from a lawsuit she was pursuing on behalf of a client against Tyson. A judge later ordered the lawsuit be dismissed. The only other mentions were from an activist shareholder group representative who spoke in general terms about wages and working conditions within the poultry industry. Ironically, while the author writes for the book that this meeting was about Tyson, the story he filed on the event for the Associated Press with no mention of Tyson.

Fiction:

“…the (poultry) contracts are often viable for a matter of weeks and signed on a flock-to-flock basis…The contracts reserve Tyson’s right to cancel the arrangement at any time.” (Page 24)

The Real Story:

Most contracts are for a minimum of three years, with many written for seven or more years; however, we have some that are 10 to 15 years in length. The standard poultry producer contract provides greater flexibility for the producer than for the company: “Producer has the right to terminate this Contract at any time with no less than ninety (90) days written notice. Company has the right to terminate this Contract upon default by Producer.” Default would include endangering the well-being of the animals, abusive or threatening behavior toward company employees, selling Tyson-owned property or violation of the law.

Fiction:

“When there were bad batches of birds, they went to the same group of farms…And, the healthiest birds also went to a select group of farms that…always ranked as the highest…” (Page 37)

The Real Story:

Given the high volume of birds produced by our hatcheries, it would be virtually impossible for us to select certain quality birds to give to particular farmers. Besides, we want all of our farmers to be successful.

Fiction:

A contract farmer could get “sued into bankruptcy by Tyson” for “discussing” or “sharing” his “ranking in the tournament (payment system)…If farmers were to meet and compare their settlement sheets, or show them to a journalist or lawyer, Tyson can sue them for leaking confidential information.” (Pages 116-117)

The Real Story:

Through the end of 2013, Tyson Foods has never sued a farmer for sharing information about their settlement or ranking in the tournament payment system. Much like an employer would regard the information on an employee’s paycheck, the company does not publicize how much it pays any one individual farmer. If farmers choose to share their personal information about their performance or their income with others, it’s their business.

Fiction:

There wasn’t a slaughterhouse in existence like the one IBP built outside Garden City in the early 1980s…Senior executives inside IBP realized that raising cattle was a waste of money. So at Garden City IBP employed a new way to procure a steady stream of cows. It was called the ‘formula contract’.” (Page 172-173)

The Real Story:

IBP (now Tyson Fresh Meats) opened a major beef processing plant in Amarillo, Texas, in 1975, five years before the company opened a similar plant near Garden City, Kansas. As noted in the book The Legend of IBP, “One of the first marketing agreements in the country took place between IBP and a company called Cactus Feeders, Inc. in Amarillo, Texas…In 1986 (Cactus Feeders founder Paul Engler) approached IBP about changing the way he sold his cattle. A formula marketing arrangement was subsequently developed…Many cattle feeders were seeking more efficient and more value-based ways of marketing their cattle.”

Fiction:

“IBP created a formula price that allowed the company to start controlling its cattle supply in a way that mimicked Tyson’s methods for controlling its chicken supply.” (Page 173) “(Feedlot operators) have chosen…to sell their animals under contract to companies like Tyson, with contracts that are modeled on those used for chicken and pork farmers.” (Page 209)

The Real Story:

Most of our cattle marketing arrangements, including those involving formula pricing, were initiated by cattle feeders not by our company. Cattle feeders came to IBP (now Tyson Fresh Meats) because they wanted a more efficient way of marketing their livestock. Rather than spending valuable time following the cash market, dealing with buyers every day, they wanted an ongoing fair pricing system based on current market conditions, which would also reward them for quality improvements and allow them to concentrate their efforts on reducing their own costs. Contrary to the claims in the book, these arrangements were not modeled after chicken or hog farming contracts. Tyson Fresh Meats depends upon independent livestock operations of all sizes to supply our plants with cattle. We have a network of more than 50 cattle buyers who are trained to buy cattle that meet our specifications for high quality beef.

Fiction:

“(Hog farmer) Allen was paid through a tournament system. His performance was ranked against his neighbors’, and Tyson docked his pay if he performed below the average.” (Page 192)

The Real Story:

Historically, we’ve not used a so-called tournament system to pay contract hog farmers.

Fiction:

“No self-respecting meatpacker still buys their hogs through a sales station. In fact, very few meatpackers buy pigs on the open market at all.” (Page 201)

The Real Story:

Tyson operates 90 hog buying stations in the Midwest to buy market hogs as well as mature breeding stock from independent farmers.


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