Egg Industry News and Commentary

  —  Mar 8

 
Lawsuit by Contractors Alleges Collusion by Integrators

    

As an anticipated offshoot of the now suspended GIPSA Rule, some contractors have initiated a class action lawsuit (Haff Poultry Inc. et al v. Tyson Foods Inc. et al. Case No. 17-CV-00033) in the U.S. District Court for the Eastern District of Oklahoma. Defendants include Tyson Foods, Pilgrim’s Pride, Sanderson Farms, Koch Foods and other integrators.

Allegations are that large broiler producers represent a cartel which has colluded to exchange information on grower remuneration and also to adopt policies disfavoring competition among integrators for contractors. It is acknowledged that through the monthly Agristats® reports integrators can determine historical levels of grower remuneration. The data is anonymous with respect to complexes listed but serves as a benchmark to establish a range of costs extending from breeding through processing. This does not constitute “collusion” as alleged.

  

The National Chicken Council estimates that there are 25,000 farmers with contracts to rear pullets, house parent breeder flocks or to grow broilers.  It is a reality that most integrators have waiting lists for new contractors and those wishing to erect new houses.  It is also an established fact that contractors stay with their integrators over many years, frequently exceeding the 15-year duration of their mortgage repayments and they enjoy excellent relationships with their servicepersons and their companies.

As frequently observed in postings on CHICK-CITE, the growth of the U.S. broiler industry is based on long-term satisfaction of mutual requirements of contractors and integrators.  Contractors have a regular income from raising broilers or housing breeders which smooths cash flow from their other farming activities which usually generate semi-annual payments for crops and livestock. The contract system allows available family members to participate in a collective farming enterprise.  Integrators are reliant on contractors to provide housing, utilities and labor to raise flocks. This allows them to concentrate investment and resources on capital intensive industrial components of production including feed milling, hatching and processing.  Integrators assume the risk of catastrophic disease, market fluctuations and increases in the cost of ingredients which represent up to 70 percent of live cost.

From experience and contact with the industry, there is little justification for claims that contractors are exploited or that integrators generate excessive profits at their expense.  If anyone profits unjustly from claims alleging exploitation, it is the legal profession and politicians.

Since the late 1940’s, the broiler industry has functioned with efficiency in a competitive environment, providing opportunities for contractors and their families and supplying our domestic and export markets with affordable protein.

It is hoped that the companies defending the spurious lawsuit will be successful in their efforts and the claims by the disaffected growers and their legal advisors will be regarded as without merit.