by Twilight Greenaway | December 11, 2018
Can a single company reshape a landscape? That’s the question at play in Nebraska, where Costco, one of America’s most powerful companies, has the potential to impact residents, farmers, and the environment in complex and unprecedented ways.
At the center of the move is the company’s $4.99 rotisserie chicken. In 2014, Costco reported selling 78 million of these processed, four-pound birds a year. In order to guarantee a steady supply and maintain the price, Costco fixed its eye on Nebraska as the best place to start raising and processing its own supply of chickens, and “break free of the monopoly” held by companies such as Tyson and Pilgrim’s Pride, much like it did for sausage and hotdogs with its Kirkland plant in Tracy, California.
In June, the company broke ground on a giant new poultry processing facility in Fremont, about an hour wast of Omaha. The plant will process more than 2 million chickens a week, or more than 100 million birds a year, and provide as much as 43 percent of Costco’s rotisserie chickens, as well as around one third of the raw birds it sells.
The effort will also include a feed mill and over 500 giant barns in which to raise the broilers, the hens, and the pullets, or parents used to breed the broilers. Costco needs to recruit around 125 farmers to build and fund chicken barns within a 100-mile radius, and it’s contracting with Lincoln Premium Poultry (LPP), a “company created for Costco in collaboration with Costco” that sprang up in 2016 to take over the business of working with farmers and building the infrastructure.
As the biggest competitor with Whole Foods, selling $4 billion in organic foods, Costco has been wooing shoppers who care about the source of their food for years. (In fact, the company just announced that it would tighten its standards around antibiotic use in all the meat it supplies thanks in part to an ongoing effort by shareholder activists). So, to say there’s a lot at stake with this new venture is an understatement.
While there has been resistance to both the plant and the barns on a county level, Nebraska’s state government has been working with industry forces for several years to welcome just such a project to the state. The operation is being billed as one of the only ways for farmers in the area to hold on to their land for the next generation, but farmers’ advocates and other experts well-versed in the woes farmers face in the chicken industry say the reward may not be worth the price.
And, to a group of farmers, land owners, and activists who have been united by the effort to oppose the plant, and are now actively envisioning a regenerative alternative, one thing is clear: This a watershed moment for the state, and for the shifting relationship between retailers and the larger food chain.
“Here you have a retailer who will now—from cradle to grave—have complete control of the entire production system,” says John Hansen, farmer and president of the Nebraska Farmers Union. “They’ll own the birds, they’ll control all of the particulars of the birds’ genetics, the production. They’ll own the feed mill and they’ll have control of the processing plant. If this model works, what will it mean for the rest of poultry industry? Will other retailers, like Walmart, be close behind?”
Lincoln Premium Poultry has been recruiting farmers for the last year and a half. The company is tight-lipped about the actual number they have signed on so far, but in a state where row crops—corn and soy—dominate the landscape, and most small-scale livestock production left decades ago, LPP says bringing poultry back has the potential to help a new generation of farmers return to their family operations.
Take farmer Debbie Borg and her daughter Hannah. They have three barns under construction in Allen, Nebraska, and they’ll be getting their first shipment of pullets next April, just a week before Hannah, 21, graduates from the University of Nebraska. They’ll be raising about 48,000 hens and 10,000 roosters, in cycles of 21 weeks each—for at least the next 15 years.
Debbie and her husband are row crop farmers who also have a cattle feedlot, and Debbie is an active member of the state’s Corn Board and Soybean Association. She says it was hard to turn down the chance to diversify the business given the fact that corn and soy prices have been abysmally low since 2014, and land is hard to come by.
“As we look to the future, it’s like, ‘How do we give our kids the opportunity to continue the farming operation if they want?’” says Debbie. “[By signing on with Costco], we’ve said, ‘You don’t have to come back, but if you want to, we want to make it possible.’”
Of course, Debbie also admits that it took a while to wrap her brain around the decision. “To be honest, I was shocked that my husband would even think about raising chickens,” she says. “But we started asking questions and we went to the meetings, and as we learned more, everything was very positive.”
“If you just read what’s on the internet you might be pretty nervous about doing this,” Debbie added. And she’s right. A number of high-profile outlets have reported on the challenges contract chicken farmers have faced—from the much-watched footage of Carole Morrison collecting dead and dying birds in her chicken house in the 2008 film Food, Inc., to farmer Craig Watts’ own footage shot inside one of the barns where he raises chickens for Perdue, to the many farms contracting with Tyson featured in Christopher Leonard’s in-depth 2014 book, The Meat Racket.
But LPP says Costco—which has a long-held reputation for paying the workers in its warehouses better than other retailers, and working with unions rather than against them—is doing it differently.
“When people talk about poultry they tend to base their opinions on the way the industry has been traditionally in certain parts of the country or with certain companies,” says LPP spokesperson, Jessica Kolterman. Instead, she says LPP intends “to treat our growers as partners in a long-term relationship as opposed to someone who’s more of a traditional contractor.” Kolterman points to the fact that LPP is offering a 15-year contract for starters. And she says, they’re doing away with the tournament system used by companies like Tyson, Pilgrim’s Pride, and Perdue, which is known for pitting farmers against one another by taking a percentage of the lowest performing farmer’s pay and giving it to the highest performers.
“We’re saying there’s a base pay guaranteed in our contract. We’ll give the top people the bonus, but we’re not taking it from the lower people to pay them,” says Kolterman. The baseline, she adds, is that LPP is only working with farmers to build enough barns to meet Costco’s needs. “If a grower isn’t successful that means we’re not successful,” she adds.
Kolterman also likes to point to the way people do business in Nebraska—based on what she calls, “relationships that transcend business.”
And while Costco clearly has its reasons for bringing the first large-scale poultry operations to Nebraska—such as relatively abundant sources of water and corn, as well as a population that is literally and physically removed from the negative experiences other farmers have had in the industry—it’s clear that LPP is also under a lot of pressure to get the operation up and going, without any back-up production. “We’re only building enough barns for what we need; we’re in a different situation than any other place where there’s a lot of poultry,” said Kolterman.
As the second farm to build a barn for Costco, Debbie Borg says there have been some challenges—the company moved back the date they’ll receive their first birds by two months, for instance. But, she adds, she has a lot of trust in LPP because of the relationships she’s formed with the people who run it. “When they say, ‘We’re going to fix that,’ they exceed my expectations.”
That kind of display of trust makes logical sense to John Hansen of the Nebraska Farmers Union, who used to work in the seed, fertilizer, and cattle businesses and has seen hundreds of thousands of dollars moved around the state’s ag industry based on handshakes in recent decades. But he worries that a farmer’s word means something very different than the word of a multinational company that brought in over $126 billion in revenue in 2017.
Married to the Barns
Hansen has seen early versions of the contract LPP is offering farmers but says the company has resisted sharing newer versions with him in recent months. And while he and others have offered information sessions from farmers and experts on poultry over the last year, he says it seems to make little difference.
“[Costco and LPP] like the idea of having folks that don’t have any real background or experience with these issues. They have the best, most experienced legal expertise and almost unlimited financial resources on their side,” says Hansen. Very few farmers use lawyers, he adds, and the odds of finding a lawyer in Nebraska with any experience in poultry contracts are slim to none, so they’re “at a huge competitive disadvantage.” The contracts themselves, he adds are offered on a take-it-or-leave it basis.
When asked whether negotiating with LPP had been an option, Debbie Borg said: “Well I had a lot of questions, having never done this before. But I don’t know what would give me the right to say, ‘Well, you need to negotiate here or you need to negotiate there.’”
This is critical, Hansen says, because the contracts set the terms for the entire relationship, and will decide whether or not the farmer makes a profit over the long-term as costs go up and prices stay the same. “There is no market. The contract controls everything,” he stressed.
And yet, the reality is that many Nebraska farmers—like those all over the Corn Belt—are facing dire straits. The Nebraska Rural Response Hotline is seeing record-high numbers of first-time “high stress” callers. The price of corn in the grain elevator near Hansen’s farm is $3.30 a bushel, or the same price that it was in 1973, when he started farming. “How do you pay for 2018 family living and production costs with 1973 prices?” he asked.
And while 15-year contracts offer security (typical poultry contracts are often closer to three to seven years), Hansen worries what will happen if farmers can’t hold up their end of the bargain due to an accident, illnesses, or other major life change. “Where’s the harm to the company in having a clause in [the contract] that allows you to go find somebody else to take your place?” says Hansen. But when NFU pressed Costco on that issue, he says “the company wasn’t willing to bend.”
Although Costco executives declined to answer questions for this article, LPP’s Jessica Kolterman, one of the de facto spokespeople for the project, said, “We would work with the grower … because we need those chickens.”
While Kolterman says LPP has 40 sites currently under construction and a “construction chart that’s filling up for 2019,” Hansen isn’t convinced. He says the fact that LPP has extended beyond its initial footprint and started signing farmers from three counties in Iowa (so far around 10-15 percent of the farmers are from Iowa, according to LPP), may be a sign that the company is having a hard time finding Nebraska farmers to make the roughly $1.5 million investment in a proposition full of unknowns.
Mike Weaver, a veteran contract poultry producer and the president of the Organization for Competitive Markets (OCM), a nonprofit that advocates for small and mid-sized farmers, shares many of Hansen’s concerns. Weaver was one of several people—including Craig Watts, an outspoken grower for Perdue who is currently in litigation with the company for whistleblower retaliation—who visited Fremont last year to speak to farmers there about what they see as the pitfalls of job.
While the base pay LPP is offering farmers is higher than average for the industry, Weaver says, “the contract they’re offering it’s pretty much boilerplate for the industry.” “And unless the farmers get really good inputs [i.e., chickens and feed] they’re going to be lucky to make those operations’ cash flow.”
When addressing the poultry industry’s larger approach, he finds it most effective to point to the numbers. “In 2015 and 2016, Pilgrim’s Pride provided major stockholders $2.2 billion in dividends. And in the 14 years I’ve been raising chickens for them, we’ve had four-tenths of a cent per pound increase in pay.”
And yet, says Weaver, “most [current] farmers are afraid to speak up because they take what the chicken companies give ’em or lose their home and their farm.”
The Big Picture
Nebraska spans the Midwest and the Great Plains, with the vast majority of its roughly 2 million inhabitants living in Omaha and Lincoln to the east. The state’s sandhills are in a geographically and biologically unique region speckled with wildlife refuges, but the bulk of the rest of the land is in agriculture, whether that means grazing or pivot-irrigated fields to the west, or more traditional Midwestern corn and soybean operations to the east.
The rural areas are remarkably underpopulated; in addition to pro-life billboards, fast food chains, and Dollar stores, the landscape is dominated by large commodity operations, feedlots, and grain silos. But behind these stereotypical indicators of Big Agriculture’s recent domination lies a fairly recent history of resistance to the consolidating forces of mainstream agriculture.
“Nebraskans have had really good, strong conservation tendencies and instincts compared to our neighbors in every direction. We’re unicameral, we’re a river and stream state with a lot of fishermen—we have a lot of unique characteristics that lend us to having a different flavor in terms of how we’ve dealt with corporate ag coming in,” says Gus Van Roenn, executive director of Omaha Permaculture. Van Roenn—like many people in Nebraska—compares the state to its neighbor, Iowa.
“The small farmer kicked the bucket in Iowa in the 1980s,” he says. “We’re starting to hit the [kinds of] legislation in Nebraska that forced the farm crisis in Iowa. We’re in that moment now, many years later.”
As Van Roenn and others see it, the fact that Costco came knocking at just this moment isn’t a coincidence. The state’s government has been actively courting animal agriculture in the last several years and the beef, hog, and dairy industries all have sizable presences there already. In 2016, the state legislature adopted a Livestock Siting Assessment Matrix—a set of guidelines designed to make it easier for counties to evaluate and approve large livestock operations, or, as opponents see it, a “rubber stamp” for lawmakers modeled on a similar policy in Iowa.
Another important shift occurred in 2016 when Nebraska—the last in a series of states—ended its ban on hog ownership by corporate meatpackers, ushering in a new era in the state and making large-scale poultry production practical. But it’s also clear that the livestock industry has been working closely with government and academic institutions in the state for years.
Kolterman herself was working for the Nebraska Department of Agriculture—“on a temporary assignment through the department’s ag promotion division”—when she took the role with LPP. And a pair of industry groups called the Alliance for the Future of Agriculture in Nebraska (AFAN) and We Support Ag have spent the last decade partnering with the state’s department of agriculture in an effort to make the Nebraska particularly friendly to animal agriculture interests.
Big Poultry, meanwhile, has expanded beyond its southeastern origins and pushed into new parts of the country, often moving west. While the top producers of broiler chickens (i.e., “meat birds”) are still Georgia, Arkansas, Alabama, North Carolina, and Mississippi, the number of large chicken barns has also been growing in places like East Texas and Oklahoma. Tyson, the nation’s largest chicken producer, had its eyes on several counties in Kansas last year, but when a groundswell of citizens fought the construction of a new processing plant in three counties, the company took a step back and decided to focus on Tennessee.
A white paper released in 2016 by seven professors at the University of Nebraska-Lincoln—and funded by the Nebraska Department of Agriculture—expressed concern that “Nebraska has fallen behind many neighboring states at a time when various livestock sectors are increasingly moving from coastal regions toward the central part of the United States” and argued that a “25 percent increase in market hogs, an increase of 60,000 dairy cows, a 10 percent increase in fed cattle, and a tripling in egg production” would lead to $1.4 billion boost for the state’s economy.
And it’s not hard to see why. At a time when rural populations are waning in Nebraska and throughout the Corn Belt, AFAN Executive Director Kristen Hassebrook (who left the University of Nebraska Foundation to take the role with AFAN and We Support Ag) sees an opportunity to grow the population by providing jobs in the livestock sector.
It’s not realistic to attract many data centers or big corporate offices to rural Nebraska, Hassebrook told the Omaha World Herald in October, “But we can recruit dairies and hog facilities and beef feedlots and do it in a responsible way, and those are going to be good jobs, butts in kindergarten seats, moms in the grocery stores,” she said.
That argument—that more concentrated livestock operations will bring prosperity and success to Nebraska residents—was on full display on a Monday in September, as Kolterman and LPP’s CEO Walt Shafer—a former Pilgrim’s Pride executive—stood before the Lancaster County Board of Commissioners in Lincoln. They were joined by Randy Essink, who had recently purchased property in the county with the hope of building four barns with LPP.
Essink—a lanky man who works full-time installing drywall while growing row crops—stepped up to the microphone with his fiancée to make his second request for a conditional use permit for the barns (the first request was before the Planning Commission this summer, but he wasn’t able to secure the votes). “It’s our intention to live on the property,” Essik told the commissioners. “Being a part of this project will give me the opportunity to farm full-time and be closer to the farm, so we can spend more time together as a family.”
But rather than go into the details about the operation himself, Essink quickly turned the microphone over to Kolterman, Shafer, and a spokesperson from the company that LPP has hired to manage the abundance of waste from the barns.
The pair has attended similar meetings and hearings around the state over the last year, where they’ve faced a range of responses, including resistance from residents in several counties and one lawsuit. By that point, Kolterman and Shafer told the commissioners, they’d been to 30 public hearings, and they breezed through a 50-minute presentation on the barns, the plans, and the environmental implications.
After their presentation, about 15 residents of the peri-urban area surrounding the proposed barns stood up to speak for their allotted three minutes each. One resident held up a handmade map, showing the site of the proposed farm surrounded by a grid of 66 homes and small farms, including his own.
Others brought up shared visuals, including an “odor footprint” that was different than the neat circle LPP had projected for the audience (apparently, the company hadn’t taken the wind into account). They also discussed the plans for the “mortality sheds”—where hundreds of dead chickens would be put to compost at a time in an unenclosed building—and catalogued the number of nearby residents whose health issues were likely to be impacted by the waste particulate in the air. Four residents suffered from chronic obstructive pulmonary disease (COPD), four had bronchitis, five had asthma, three had severe allergies, one had sarcoidosis of the lungs, and two were seriously immune-compromised, they said.
One area resident also brought up the fact that one commissioner, Todd Wiltgen, had helped form We Support Ag. Wiltgen’s response? “I don’t stand to benefit financially, so your concerns aren’t really that valid.”
The night before the hearing, the group of citizens had convened in a squat white community hall off an unpaved road, not far from where the barns in question were planned to go. Just one of two buildings in the unincorporated community, the space felt trapped in another time, and the citizens—a group of mostly older folks—had put their lives on hold in hopes that their numbers, their concerns, and their collective voice might be enough to move the needle. They were coached by a local lawyer and by Randy Rupert, a former railroad employee and artist from Fremont who played an active role in organizing the resistance against the Costco processing plant last year and has been present for most of the county-level meetings since then.
As one of the largest, most organized groups opposing the barns in a less-rural county than most, Rupert told the neighbors they might have had a fighting chance. As he saw it, LPP had worked hard to position the opportunity for farmers as good for the community, but ultimately it wasn’t just a fight about a local, NIMBY issue.
“Lincoln Premium Poultry talks about how we use our water to grow corn and then send the corn out of state, whereas when we feed the chickens the water stays with the chicken,” Rupert said. “But that chicken’s not going to our local Hy-Vee. They’re mining our water and our land for a product that’s eventually going to travel 2,000 miles.”
Rupert sees Costco as just the first in a series of similar enterprises that will soon arrive or expand in the state. “Costco is only the camel’s nose under the tent. The hog producers will be watching, the turkey producers will all be looking at how easy it will be for these people to get set up in eastern Nebraska,” Rupert recalls thinking while setting up the opposition group Nebraska Communities United (NCU) last year. And, to some degree, he’s been right.
The Hormel plant in Fremont (the same one featured in Ted Genoways’ 2014 book, The Chain) was recently bought by the Minnesota-based company WholeStone Farms, which has expressed interest in processing more pork at the facility and using the LPP model, or relocating at least some of its producers in Nebraska.
Labor at the Fremont plant—and who will do it—has also been an ongoing question for many residents. Company officials have said that workers at the processing plant will earn between $13 and $17 an hour to start—a salary that will likely draw newcomers to Fremont, as it has in communities like Storm Lake, Iowa and Garden City, Kansas. And while that fact has elicited a range of responses (some of them openly Islamophobic), Rupert hopes to extend the conversation beyond ethnicity.
“We’re going to have more immigrants in this town and they deserve to have the same advantages that we do,” he says. “They shouldn’t come here as a subclass of people because all that does is cause derision and angst in the community.” NCU worked to get a ballot measure in place raising the minimum wage in the plant this fall but didn’t succeed.
“Forty years ago, Hormel was paying $14 an hour to start—those were good jobs,” says Rupert. Now, he says “you’re bringing in 1,000 people who will be below the federal poverty line into a town that won’t acknowledge they’re going to do this. We’re just setting ourselves up for angst and discrimination.”
At the Lancaster county commission meeting, however, the health of nearby residents and quality of shared resources received the most focus. Graham Christensen—a close colleague of Rupert’s and another unofficial spokesperson for the local resistance to the Costco project—was one of several critics to put water quality in the spotlight. Christensen is a farmer, the owner of solar energy company, and district director of the NFU. He, Rupert, and others have been working with volunteers around the state to conduct a citizen science program with the University of Nebraska Medical Center looking at the water quality in the areas where both the Costco plant and the chicken barns are planned.
“We looked at the nitrates—over the last 40 years they’ve doubled,” Christensen told the commissioners. Christensen pointed to the Elkhorn and the Platt, the two rivers that meet just north of the city of Lincoln “The Department of Environmental Quality’s own analysis shows that a lot of the waterways in this area are already ‘category 5,’ or impaired. None can take any more pressure from nitrates,” he added
“I was first tipped off in 2016 when I made a call to the regional EPA office,” he said. “The representative that I spoke to told me this was the worst location she’s ever seen for an operation of this magnitude.”
In public settings, Kolterman has often pointed to the fact that LPP is going above and beyond what the state requires on an environmental level. But opponents believe that says more about the lack of effective laws than it does about the company. While the farmers aren’t required to apply for permits with the state’s Department of Environmental Quality (DEQ) (because unlike hog or cattle, chickens don’t produce liquid waste), LPP is requiring farmers to get permitted.
But the barns will produce massive amounts of dry litter, and while there are limits to the amount each farmer can apply to their croplands, Rupert says that once they give that manure to another land owner, those limits may not apply. That matters because over-application of manure can lead to serious water pollution problems, like the ones that have occurred in the Delmarva Peninsula, the nation’s most concentrated poultry-growing region, which borders the Chesapeake Bay
And while the barns supplying Costco will incorporate state-of-the art technology from Europe, Christensen points to the fact that they won’t ultimately represent break from the densely populated housing or the fast-growth genetics that poultry farms use all over the country.
“This form of agriculture is outdated. It’s a big, morphed-up version that’s falling out of popularity with consumers,” he said at the meeting. “There are a lot of groups working on a better future for our state to continue to be an agricultural leader.”
Building an Alternative
The Lancaster county commissioners voted 3 to 2 to approve the permit for Essink’s barn, and while the fight’s not over—a group of citizens have said they plan to appeal the decision—it’s hard to imagine the effort resulting in more than a delay.
But Rupert and Christensen are taking these kinds of losses in stride as they work to champion regenerative agriculture as an alternative to Costco’s inevitable impact on the landscape.
“Graham and I realized that one of the reasons so many states want this kind of industry is because their citizenry has lost touch of where its food is coming from,” said Rupert. “So, we said, ‘Let’s start providing options, other directions that people can go to get off this corporate treadmill.’”
Rupert and Christensen started a group called RegeNErate Nebraska, which partners with farmers and urban ag organizations for an ongoing series of educational events. The group also created a guide to the state’s regenerative farms and businesses, such as Ben Gotchall and Tammy Austin’ Davey Road Ranch and Ficke Cattle Company, run by Del Ficke, the so-called “apostle of regenerative agriculture.”
Rupert and Christensen meet for coffee just about weekly to discuss strategy. Christensen is in his 30s, Rupert is in his 60s, both are natural networkers who have spent a lot of time organizing community members over the last two years, and they both speak from direct experience. Rupert’s wife is a landowner near Fremont and Christensen’s family farm—which has been operating in Nebraska for 151 years—isn’t far from several of the proposed barns. They’ve also faced their face share of antagonism; Rupert says he has come home to find “buckets worth” of nails spread across his driveway three separate times.
This summer, Christensen reached out to farmers who were considering working with Costco, in hopes of convincing them to reconsider. “I said, ‘It not only puts others at risk, it puts you at risk because you’re our neighbors,’” he recalls. Instead, he was proposing a lower-density poultry production model put forward by a Minnesota-based group called the Main Street Project. Because building the infrastructure to support this model will take time, however, none of the farmers bit. But Christensen believes it’s just a matter of time before the approach takes off in the state.
Main Street Project’s approach—which has been implemented in Northfield, Minnesota, and on several Native American reservations, including on Winnebago tribal territory in northeastern Nebraska—works with a group of farmers who raise chickens for meat and eggs in conjunction with growing hazelnuts and other perennial trees and shrubs, cover crops, and small grains that provide additional cash value while acting as feed for the birds.
“It took us a few years, but we were able to engineer an alternative, more natural production system for poultry that we’re capable of scaling to significant numbers,” says Reginaldo Haslett-Marroquin, the systems and strategy officer for the Main Street Project and a native of Guatemala. Haslett-Marroquin has worked on economic development projects with Indigenous communities since the 1980s.
“I honestly don’t care what Costco’s doing,” he says. “I just think we’ve got to get smart and we’ve got to get really good at regenerating the landscape and bringing people back to farms and doing it in a scientific, economically solid, and ecologically sound way—because that’s at the end what’s going to win.”
In the meantime, Lincoln Premium Poultry is moving ahead with its efforts. In late September, the company hosted an open house in one of the first finished pullet barns, which should go into production within the next few months. The barns belong to Colten Schafersman, a sixth-generation farmer who will be out of debt for the barns in 15 years, about the same time the first contract expires, if everything goes as planned.
Hannah Borg—who will return to her parents farm to work in their barns—is also a sixth-generation farmer. She says choosing to come home after pursuing a degree in ag communications and farm broadcasting wasn’t a simple decision. And she finds the decade-and-a-half long commitment both daunting and reassuring, at a time when most of her classmates still have no idea what they’ll be doing come September.
“It would be really easy for me to find an industry job and have vacation time and one of those really nice salaries. But I’m choosing to go figure out how to make it work [on the farm]. And I’m really proud of that decision,” she says.
Running the barns won’t take up all her time, and Borg hopes to continue working in media and building her brand in the ag world in her spare time. But the chickens will require someone to be on site at all times.
It’s a fair trade-off, Borg told me. And it’s easy to see why so many people talk of marriage when they consider entering into a poultry growing contract. But just how long she and other farmers will be able to retain a balanced sense of give and take—when they get hitched to Costco or any company that size—is still a very open question.