NOBULL: Making a Racket: Christopher Leonard Goes Behind the Scenes in the American Meat Industry
Making a Racket: Christopher Leonard Goes Behind the Scenes in the American Meat Industry
By Kerry Trueman on March 3, 2014
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Factory farmed chickens have it bad, but in Christopher Leonard’s new meat industry exposé The Meat Racket, it’s the farmers who get plucked. Leonard, a former agribusiness reporter for the Associated Press and now a fellow at the New American Foundation, subtitled his book The Secret Takeover of America’s Food Business, and he’s not kidding about the “secret” part. When Leonard set out to investigate how four huge companies came to more or less dictate the state of our meat supply, he ran into balky bureaucrats and fearful farmers.
Leonard dug in and earned the trust of enough willing folks (including Don Tyson, the late CEO of Tyson Foods) to give him a thorough account of a poultry power-grab that eventually spread to pork and beef. Meat Racketfocuses mainly on Tyson because they pioneered the breakthroughs that largely drove this transformation.
As Meat Racket reveals, these efficiencies of scale have often come at the expense of farmers and consumers. But the dubious business practices that Leonard documents have largely escaped scrutiny until now, because this extraordinary consolidation of power took place in off-the-radar places like Waldron, Arkansas, a small town with a big Tyson plant.
We spoke with Leonard recently about vertical integration, Don Tyson’s laser-like approach to business, and the meat industry’s reaction to his book.
The book’s title may sound like hyperbole, but it turns out to be all too apt. While some of Tyson’s practices could be deemed merely unethical, you document others–such as cheating farmers by deliberately undercounting the weight of their chickens, or intentionally unloading unhealthy chicks on farmers who dared to speak up about such abuses–that seem downright criminal. Was any of this a surprise?
Actually, that’s where the book really started for me. In 2004, I was sent down to Waldron, Arkansas, where there’s a giant Tyson foods facility, and I was really shocked by the power this company had over the farmers and the whole town. These farmers were pretty independent people, independent business owners, in a certain sense. But, when you brought up the company’s name, they would just stoop their shoulders. People were afraid to talk about Tyson Foods in their own home, it was just an incredible power structure. Tyson is really emblematic of the meat system today, it’s not just one lone bad actor, if you will. The abuses seemed to just flow naturally from having outsized power.
Your book exposes a problem with the production method called “vertical integration.” Simply put, it’s when large corporations achieve dominance over the market by swallowing up the smaller mom-and-pop companies who make the necessary components for those products. This eliminates price negotiations and other forms of competition, leaving economic philosopher Adam Smith’s proverbial “invisible hand of the free market” more or less hogtied. Is this where capitalism and democracy collide?
Well, there’s an invisible hand at play, but it’s not the hand of the free market! It’s the hand of the big company. And it’s not just that age-old boom and bust cycle, where prices go down and the farmer gets paid less. We’re looking at a contract farming system that companies like Tyson invented in the 50s and 60s and really perfected. It systematically squeezes many farmers to the point where they have to declare bankruptcy.
One example of that is Tyson’s “tournament system” for paying its farmers. Instead of paying them based on a certain price per pound–like most farmers are paid–Tyson collects all the farmers in an area, and ranks them against each other based on how efficiently they did. The most efficient producers get a bonus, the bottom producers get paid far less.
You get a pool of farmers, half of whom will always do well, half will always get punished. So, even if they all do a great job, half of them will get money taken out of their pocket by the other half. It’s a way that companies like Tyson can divide and conquer rural communities. It systematically depresses farmers’ paychecks and keeps them very volatile.
You point out that the savings Tyson squeezes from its farmers don’t get passed on to the consumer, despite Tyson’s claims. What would Thomas Jefferson make of this model?
On paper, contract farming is very efficient. When one company owns the local slaughterhouse, the local feed mill, the local hatchery, it can create great efficiencies. As we industrialized this meat process, the inflation-adjusted price of meat really fell in the 70s, 80s, and 90s. But because these companies have been allowed to get so much of the market share, because they now so thoroughly dominate where meat is produced in rural America, they’ve changed the power structure of the societies in these towns.
Once Tyson realized that the actual raising of the chickens was the one area of production that wasn’t profitable, they offloaded the risks onto the farmers. But the deck seems so obviously stacked against the farmers from the get-go. How do they keep finding new farmers willing to assume so much debt?
You’d think a company could get away with doing this for five years, but then people would no longer participate. But there is a sentimental component to this, a human factor that’s really important to understand. These contract farmers love the community where they grew up with their friends and family, they remember what Main Street was like when they were kids and they’re really tied to this idea of being a farmer. It’s not like somebody who’s born in Chicago, with a menu of job choices.
These big chicken companies seek out economically marginal places, open up shop, and effectively keep those places economically marginal. And the company gives a really good pitch. It’s been pitching this system to farmers for decades as a way to have stability and more of a guaranteed income.
There are glossy brochures that make chicken farming look fantastic, Tyson has put up well-produced videos on its website talking about what a great gig this is. If you’re somebody who wants to believe this is true and wants to stay in their small town, they might sign up for a contract. I can’t tell you how many people I interviewed who signed up and just one or two years into it realized they’d signed up for something totally different than what they thought it was.
So, it looks good on paper and they sign off on huge loans to build these state-of-the-art chicken houses, with an apparent commitment from Tyson to supply them with chicks, and then they have the rug pulled out from under them. Isn’t that a kind of confidence game?
I never thought of that term before but it really is very apt. It is a confidence game and the tournament system is a concrete example. It sounds like a great incentive-based system. But in chicken farming, the main criteria for your success are the health of the chickens and the quality of the feed. And Tyson controls both of those elements.
The tournament constantly pressures farmers to compete against their neighbors and the only way they can hope to get higher in the tournament is to borrow more money from a bank to either build new chicken houses or upgrade their old ones..
You spent a lot of time talking to Don Tyson, the CEO who turned Tyson into the massive corporation it is today. You describe him as a genius. It’s a very sympathetic portrait of the man who may be more responsible than any other single individual for the proliferation of cheap, unhealthy food. Did you get the sense that he ever contemplated the dark side of his empire?
Don Tyson grew up in the depths of the depression, in a world where he knew that he could go out of business any day. Nobody gave Don Tyson anything. That spirit of trying to stay low cost, relentless and ruthless in business–if you signed a bad contract with Tyson, well, you know, that’s kind of on you, right? Nobody forced you to do it.
That’s the thinking that it took to turn this into the world’s biggest meat company. I do think he’s one of the great unknown geniuses in American business; he transformed an industry. But it’s sort of up to society to also have a say in this. Tyson is constructed right now to benefit its shareholders very well and those people are doing great.
But it’s at the expense of the American consumer, the environment, the livestock. He pioneered the treatment of animals as widgets, like, how can we squeeze these animals into ever tighter quarters, how can we breed bigger chickens faster, even though their health suffers as a consequence. Did he ever give those things a moment’s thought?
He was focused like a laser on his business. I’ve interviewed a lot of people who run factory farms and there’s a predominant mindset that the animals are food and they’re grazed in these barns shoulder to shoulder.
In President Obama’s first term, you depict his administration as having a genuine desire to reform the meat industry. But they failed to anticipate the fierce resistance they’d get from the industrial meat lobby. If the President of the United States can’t intervene on behalf of the many farmers, who can?
That’s a fantastic question and I want to reiterate here that Tyson is emblematic. Tyson’s one of the big four, and Tyson pioneered this system, but Cargill, JBS, Smithfield–they’re playing by the exact same playbook.
When Obama came in, there was a really aggressive reform agenda being pushed and it looked like real change was in the offing. My personal assessment from having talked to lots of people inside the USDA who worked on this, and people on the outside, is that the administration just did not have an appetite for this fight. The minute resistance started coming up, it was the administration’s impulse to start negotiating and retreating and going backward. They were sort of afraid to own the concept that sometimes anti-trust enforcement is good for the economy. It creates jobs. Increasing competition can help producers, it helps consumers, it helps economic growth.
I think that during the 70s and 80s, there was a general societal belief that as long as we had “good monopolies”–companies like Walmart that would take control of a market but deliver lower prices– that was OK. So as long as Tyson could show that they were making meat really cheap, regulators gave them a pass and let this industry become highly consolidated.
You do implicate the American consumer at one point, saying that we demand this cheap, plentiful meat. Do you think if more people knew these details they’d still be so comfortable buying this stuff?
I think they would not and that’s a huge thing. The criticism I give to consumers is just that they’re not paying attention. This stuff has all happened under the radar, and there’s too much of a mentality that if I walk into a store and the meat is there at an acceptable price, I don’t really care how it’s produced.
But that’s changing. I’ve been covering agribusiness since the late 1990s and people today realize that the production methods matter.
You note that when they started breeding for faster growth, bigger breasts and so on, the texture of the meat suffered, but no one cared because it was just going to get deep-fried anyway!
Without question, when you industrialize meat production–and we’ve seen it happen first to chickens, then to hogs and cattle–you’re not aiming for high quality, which brings high variability. You’re aiming for that predictable middle point of quality, to where you can get that piece of meat to Walmart 24 hours a day as cheap as you can get it.
So, consistent mediocrity is the goal?
That sounds like a criticism but it’s total reality, that is what they aim for and they’ve done a really great job with it.
Tyson, The American Meat Institute, and The National Chicken Council have all issued reactions to your book. You’ve had a few days to ruminate over their responses. How would you characterize their dismissals of your allegations?
I’ve been surprised at the platitudes that they are throwing out. I spent years reporting this book, it’s based on the company’s own documents, on litigation documents, and on-the-ground interviews with farmers and people who worked inside Tyson Foods. It’s specific.
And so far, the allegations have just been, “this is a hit piece,” or “this is anti food system.” They’re calling me nostalgic because I think competitive and transparent markets are a good thing! It’s been interesting to watch. A healthy debate about this stuff is good.
Do you think the tide is starting to turn? Do you think consumers are going to be willing to pay more for meat that they can feel better about?
Yes! Consumers are beginning to demand something different and I think that if you injected just a little bit more transparency and competition into this system, consumers would flock towards it. People care about their meat, they want it to be high quality, they want it to be affordable.
But lots of people don’t want to think that their pork came from a hog in a gestation crate who couldn’t move. And farmers will respond to that demand. Farmers want to make the best possible product that consumers will like. We need actual consumer choice and we need options, and then I think lots of these problems will start to solve themselves.
For those in the NYC area, Chris Leonard and New York Times reporter Michael Moss will be discussing The Meat Racket on Wednesday, March 5 at 6:30 pm at New America NYC at 199 Lafayette St Suite 3B. More information here.