Facing a merger and a pay cut, chicken farmers push back

This article features Government Accountability Project and was originally published here.

In 2003, Rusty and Trina McClendon quit their jobs and put everything they owned up as collateral for a $1.4 million loan to build eight chicken houses, capable of raising a million chickens a year. With a contract from Sanderson Farms, now the nation’s third-largest poultry company, the couple got to work in Magnolia, Mississippi, where Rusty had 350 acres. Their only child, Dallas, was just 7 at the time, and his childhood weekends, holidays, and summers were spent working on the farm.

“We put our life on the line, and we do it because we love doing it,” said Trina.

It was a decision that came with considerable risk. Decades of mergers and vertical integration have left the poultry industry dominated by a handful of companies. Those companies have near-total control over the contract farmers, determining everything from the types of birds they raise to what those birds are fed, how they’re medicated and how and when they’re slaughtered. The farmers don’t own the chickens but any losses are the farmer’s responsibility. The typical U.S. grower has over $1 million in loans and the take-home pay is often a far cry from what the company advertises during recruitment. In the years before Rusty died, Trina said, they had negative cash flow for at least part of the time, and were relying on credit cards for groceries and other household expenses.

Trina’s retirement plan began to crumblein early August, when Sanderson Farms announced a base pay cut for its growers throughout Mississippi. The cut, which amounted to 9-percent per flock (not counting bonuses or penalties), would cost the McClendon farm nearly $45,000 a year and force it to operate with slimmer margins, possibly even at a loss.

The news came two days after Cargill Inc., the global food company, and Continental Grain Co., a major food and agriculture investor, announced a $4.5 billion agreement to acquire Sanderson Farms. The move would effectively merge Sanderson, Mississippi’s only Fortune 1000 company, and Wayne Farms, a poultry company owned by Continental, which also has a significant presence in the state. The deal would give Sanderson and Wayne Farms 15 percent of the U.S. poultry market and would increase market share of the top three chicken processors to over 51 percent. It is scheduled to close as soon as the end of the year.