Arkansas lawmakers oppose a rule that would hurt Big Poultry. They all receive campaign contributions from the companies affected.
The poultry industry has funneled at least $580,000 into Arkansas congressional campaigns over the last few years.
by H. Claire Brown, The New Food Economy
November 29th, 2018
Between 2012 and 2018, American poultry growers received $1.8 billion in loans from the Small Business Administration (SBA). That’s three-quarters of the total loans that went to agricultural businesses overall during the same period. These loans are designed to help small business owners buy land and equipment or refinance debt.
But this year, the agency decided that poultry growers don’t actually function like small business owners. That’s because they’re often contracted by an integrator—Tyson, Cargill, Pilgrim’s Pride, and other corporations that control most or all aspects of production—that hatches the chicks, provides the feed, and slaughters and sells the finished product. Contract growers are only responsible for caring for the animals until they’re big enough to eat. In the eyes of SBA, that means they should be treated more like subsidiaries or employees of large, multinational corporations. And that means no more taxpayer-backed financing for their operations.
Arkansas is the second-largest poultry producing state, and most of the animals grown there are raised under this contract farming system. So it makes sense that the state’s politicians would take an interest in the administration’s decision.
Last Monday, all six of Arkansas’ members of Congress, all Republicans, united to send a message to SBA. The agency, they said, was wrong in deciding that many poultry growers don’t actually operate independent businesses. Contract farmer advocates, on the other hand, support the decision.
“The government putting up $1.8 billion to finance the production buildings [chicken houses] for the Tysons, the Perdues, the Pilgrims, is vital to their business model. Otherwise they have to pay a fair market value and that comes out of their pockets, not the taxpayers’ pocket,” says Joe Maxwell, executive director of the Organization for Competitive Markets, a group that has advocated for contract farming reform.
So why do legislators want SBA to reverse its decision? Money may play a role. Since 2014, all six Arkansas lawmakers have received campaign contributions from Tyson. In total, they’ve collected at least $580,000 in campaign contributions from the poultry industry (this includes individual integrators as well as industry groups) in that time.
“I think that Tyson and the other vertical integrators will put extreme political pressure on every one of those members of Congress and the Senate that they believe are their friends to kill this rule,” Maxwell says, “because it is core to their business model.”
In March, the Office of the Inspector General (OIG) released an audit showing that, because integrators exercise such a high degree of control over their growers, the agency should no longer consider contract farmers eligible for small business loans. The agency agreed, and in late September, it released a proposed rule that would classify many contract growers as “affiliates” of their integrators.
As I wrote at the time, it’s kind of like the government deciding that Uber drivers aren’t actually independent contractors. Think of it this way: Uber controls the price of the ride, the quality of the app, the route, and the number of passengers on a given route. There’s an argument to be made—and it’s been made in court—that drivers should be classified as employees or affiliates because they don’t really operate independent businesses. If Uber drivers were employees instead of contractors, the financial equation would change for everyone involved. Uber would have a higher tax burden, drivers would shoulder a lot less risk, and Uber would likely be very unhappy about it. The same is basically true with contract growers.
From the auditors’ perspective...