Government’s own watchdog claims huge poultry companies exploit small business loans – Mother Jones
The chicken is The favorite meat of Americans. Its production represents a company of 30 billion dollars, dominated by a few big players. So why should the US Small Business Administration facilitate taxpayer-guaranteed loans to de facto subsidiaries of these companies?
This is the question asked by a blunt new check by the Office of the Inspector General of the Small Business Administration. The SBA was based as a federal agency in 1953 to “help, advise, assist and protect the interests of small businesses” while its BIG exist to “ensure independent and objective oversight” of the office.
Between 2012 and 2016, the OIG report states that the SBA supported 1,535 loans, worth a total of $ 1.8 billion, to contract chicken farmers. (Another federal entity, the Farm Service Agency of the United States Department of Agriculture, suggests similar loan support poultry farmers.) On the surface, contract chicken farmers can seem like independent businesses. They supply adult birds to the big companies who slaughter them, butcher them and package them in the drumsticks, breasts and thighs that we buy at the supermarket.
But here’s the problem, according to the OIG: in reality, these farmers do not operate independently at all. They are essentially the branch of production of enterprises, operating as they please. Farmers are offered a contract, usually covering a single flock, to raise birds from the chick to slaughter weight stage. The company provides the chicks and food to the farmers. Farmers, in turn, are paid to keep the birds (which they never own), in facilities the size and design of which are dictated by the companies.
Farmers are financially responsible for building and maintaining these facilities — typically 40-foot by 500-foot ventilated barns — and they are quite expensive. According to Sally lee, associate director of Rural Advancement Foundation International-USA, a farmers’ rights group, a “new chicken coop costs an average of $ 300,000 to build, and the average chicken farm today has at least 4 houses, although the current trend is to build new farms with a lot more. ”
This is where the SBA comes in. The agency has helped farmers obtain bank financing to build chicken coops by guaranteeing that loans will be repaid even if the borrower defaults, according to the OIG audit. But under the agency’s mandates, it should only provide this service to small independent businesses, and contract chicken farmers should not be eligible, says the OIG. Large poultry companies exercise “such complete control over producers” that farms should be viewed as subsidiaries of the company, not independent operations.
The control poultry companies enjoy over their contract farmers is impressive: they dictate “how to inspect flocks and barns, prescribing where and how to walk in barns, the frequency and timing of inspections, and how to record the results” . Other factors controlled by the companies include “lighting, heating, ventilation and cooling of the barn, feeding the flock, watering and slaughter of birds”. Then there are those expensive barns: The companies give “detailed construction specifications for the producer henhouses”, including grading, equipment, signage and construction supervision.
Companies also regularly demand “significant capital improvements” to existing barns and equipment. Such mandatory spending locks farmers into a cycle of debt, often forcing them to “seek additional funding” from the SBA’s loan program, the OIG report says.
Large processors may also simply decide not to renew farmers’ contracts, which can lead to the collapse of the farm. Because without a contract, those $ 300,000 chicken coops are virtually worthless. To drive the point home, the report details the fate of several poultry farms that received SBA loans and then lost their production contracts:
In essence, the report exposes two scandals. The first is that the Small Business Administration helps meat packers with billions of dollars in annual revenues obtain taxpayer-backed small business loans to expand their chicken production capacity. The second is that these farmer-entrepreneurs undergo a kind of debt driven serfdom. Like a USDA Study 2014 shown, the average contract poultry farmer “is likely to earn about $ 11.50 an hour”, after factoring in operating costs and interest.
In a recent statementMike Weaver, president of the Organization for Competitive Markets, an independent farmer advocacy group in corporate-dominated agricultural markets, called the OIG’s analysis of the chicken market “no surprise.” He called for federal antitrust action to “ensure that poultry farmers can operate as small businesses” and to “stop subsidizing the increase in production of these multinational companies by US taxpayers.”
Instead, Weaver noted, the Trump administration is moving in the opposite direction. Last October, the USDA pulled back rules, finalized at the end of the Obama administration and known as GIPSA, which is said to have enhanced the ability of farmers to take unfair chicken company practices to court.
Regarding the Small Business Administration and its habit of supporting loans to poultry farmers, the agency has until August 31 to address the OIG’s concern that these entities are not independent small businesses and therefore should not. be eligible for related loans. Senator Cory Booker, (D-NJ), added to the pressure by attaching an amendment to a Senate bill requiring the SBA to report to Congress on how officials handled the findings of the OIG report. In his mission statement, the SBA says it aims to “preserve competitive free enterprise.” His de facto support for Big Poultry appears to contradict that goal.