Questions & Answers
What’s your reaction to the book's criticism of your company?
It’s disappointing the author has chosen to paint such a misleading picture of our company. We’ve been in business a long time and believe our company is effectively built to give farmers opportunities to prosper and enables us to produce safe, affordable food for people.
The book claims companies like Tyson have built a system that “puts farmers on the edge of bankruptcy.” How do you respond?
We depend on thousands of farmers and we want and need them to succeed. Some of them have been successfully raising livestock or poultry for us for decades, and in some cases, for multiple generations. In our poultry business, Tyson Foods supplies the 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 represent a majority of the cost of raising chicken.
The author also claims the system Tyson created “charges high prices to consumers.”
We sell to retail and foodservice customers and do not set consumer prices. What we ask for our products is determined by supply and demand. We work hard to produce our products efficiently, so they remain affordable. The author downplays the common causes of changing food prices, such as the fluctuating cost of the grain used to produce animal feed. He also ignores the fact that U.S. consumers still spend less of their income on food than consumers in most other countries around the world.
How do you respond to claims Tyson’s market share in chicken, beef and pork is too big?
Since we’re competing for the center of the consumer’s plate, we face plenty of competition, not just from other meat companies, but from other businesses involved in producing food both here and the U.S. and in other parts of the world. 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.”
The back cover of the book tells of Tyson Foods ordering production cuts “by 5 percent” and how this contributed to higher consumer prices for chicken. Is this true?
In the fall of 2008 there was an oversupply of chicken products relative to demand and as a result the price Tyson Foods could command for those products in most cases did not even cover the costs of producing those products. Tyson Foods was losing money on virtually every pound of chicken sold, which meant the more products the company produced in this environment, the more losses we sustained. Companies in all industries must match the supply of their products to the demand for those products or eventually they will be out business. The meat and poultry industry is not exempt from this basic economic principle. A company cutting production during periods of oversupply to better match the demand of their customers is a common business practice and does not violate U.S. antitrust laws or the Packers and Stockyards Act.
Is it true farmers are kept on short-term, “flock-to-flock” contracts and live in fear that they’ll be dropped?
Contrary to the impression left by the author, our contracts with poultry farmers are typically three to seven years; however, we have some that are 10 to 15 years in length.
Is it true Tyson Foods avoided paying $26.5 million in annual taxes by defining itself as a family farm and using a cash-basis loophole?
These tax claims are misleading. Most U.S. poultry processors like Tyson Foods started as family-owned businesses and for many years lawfully qualified as a family farm for tax purposes. This system allowed the companies to defer, but not avoid paying taxes. Tyson Foods discontinued use of the cash method after the Tax Reform Act of 1986 restricted the use of the cash basis of accounting to farms with annual gross receipts less than $25 million.
Why does Tyson use a tournament system – with farmers competing against each other – to determine pay for poultry farmers?
What we use is really a performance-based incentive system that rewards those farmers who efficiently produce healthy chickens. This is not unique to Tyson. The so-called tournament systems are used by virtually every poultry processing company in the U.S. to determine grower compensation. In general, the amount farmers are paid is based upon how effectively they convert the feed we provide into weight gain in the birds they raise. It involves such factors as the number of birds, the amount of feed used, the performance of their flock compared to those raised by other contract farmers and the weight of the birds when delivered to the processing plant. The single biggest factor in what a farmer earns is the performance of their farm and how well it’s operated.
Like any business, this does involve some risk. However, the biggest risk factors in chicken farming are the cost of feed and the market price for processed poultry products. Grain prices and market prices for finished goods are volatile and the industry has seen severe fluctuations in these two areas over the past few decades. These risks are born entirely by integrators like Tyson Foods. Poultry growers are completely insulated from these risks by virtue of their contracts with Tyson Foods.
We want the farmers who raise chickens for us to do well because their success directly affects ours. The average farmer has been raising chickens for Tyson Foods for 15 years. Some farm families have been raising chickens for us for three generations.
Doesn’t this system shift risk to the farmer? Isn’t the tournament system unfair to those farmers that have older chicken housing?
Chicken farming is like any other business; each farmer must decide independently how much to invest in their operation to make it competitive. We don’t make the decisions for them. If we segregated our payment system based on the age or type of the housing used, it would favor those farmers who have chosen against investing in ways to make their operations better and would be unfair to those who have. Chicken processing also requires re-investment. That’s why we’re continually putting money back into our plants to keep them operating efficiently.
Why was Tyson Foods against the proposed GIPSA rule in 2010?
We were disappointed USDA officials would forward regulations that, by their own estimates, would impose millions of dollars a year in additional costs. Those regulations were written by a former trial lawyer with a history of suing companies like Tyson and in his own words were a “trial lawyer’s dream.” We believed then, and still believe today, that the proposed GIPSA rule would be bad for farmers, food companies and consumers. The original proposal went far beyond the direction Congress gave USDA in the 2008 Farm Bill. As a result, Congress had to intervene to correct the course USDA had so zealously taken. We also want to point out our company depends on thousands of family farmers across the country and our relationship with them is already extensively regulated. We want and need our family farmers and ranchers to succeed so they can continue to supply our operations.
What does Tyson do to help chicken farmers experiencing problems with the performance of their farms?
If a contract farmer’s operation is not performing well, we have a program in place designed to help them get back on track. It gives them multiple opportunities to improve their performance and typically includes a meeting to discuss ways to do better. We want them to succeed. In some cases, we may recommend they make certain improvements in their facilities.
Why didn’t Tyson inform Waldron area farmers in the early 1990s of the company’s plan to switch to smaller birds?
A change in desired bird weight is customer and market driven and contract farmers would certainly know about any such change since the timing of the pick-up and delivery of the chickens to a processing plant would be determined by the market weight of the birds.
Is it true Tyson often makes mistakes when it documents which birds are delivered to processing plants from which farms?
We have a computerized system for tracking the pick-up of birds from a farm and subsequent delivery to one of our plants. It has safeguards in place to ensure farmers are getting credited for the birds they’ve raised.
Is it true that Tyson managers intentionally deliver poor quality, weaker chicks to farmers they don’t like?
This claim is simply “urban myth.” Given the high volume of birds produced by our hatchery, it would be virtually impossible for us to select certain quality birds to give to particular growers. For example, our hatchery at Waldron hatches more than 875,000 birds per week.
Why would Tyson intentionally deliver bad chicken feed to one of its farmers?
Such a claim makes no sense, when you consider the company owns the birds and we want to make sure they’re raised properly since healthy animals mean safe and healthy food.
What caused chickens on a farm near Waldron, Arkansas, to die? Did Tyson deliver poor quality chicks or bad feed?
Mr. Leonard talks about the loss of chickens in Waldron ten years ago. Our recollection is different than his. Contrary to his claim, the birds were not sick when they were delivered to the farm. They contracted viruses after they arrived at the farm. Fortunately, the poultry industry has since learned how to largely control these types viruses through on-farm management practices.
Why doesn’t Tyson Foods give chicken farmers the same rights as hog farmers were provided through the company’s agreement with the Iowa attorney general?
They’re different businesses, so it would be like comparing apples and oranges. Our poultry operations are vertically integrated, which means we own the chickens and are involved in each step of the production process. Our pork operations are not vertically integrated. We don’t own the pigs and instead rely on farmers to sell us the animals we need to operate our pork processing plants. We entered the agreement with the state of Iowa in 2009 because we believe it provides “greater flexibility in our marketing relationships with pork producers, helping ensure the producers have a competitive outlet for their livestock and we have a steady supply of hogs to run our plants.” We also noted “the decree also puts Tyson on equal footing with other pork processors who already have similar agreements with the state.”