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The age of the Zilmax sirloin points to the broader changes that contract cattle production has helped bring about. Tyson has finally managed to tame the cattle herd. And by doing so, it has largely completed its project of chickenizing the meat industry. There are still some holdouts in the cattle business, the Ken Winters and Gene Carsons of the world, but the tide of money is inexorably moving toward the contract operations like Lee Borck’s.
While Tyson has been the architect of this system, the driving force behind it has been the American consumer. Americans have decided that meat must be cheap and plentiful. It must be consistent in its attributes and predictable in its taste. It takes factory farms to raise meat like that. It takes companies like Tyson. It takes networks of chicken farmers integrated tightly with big slaughterhouses like the one in Waldron. It takes a steady flow of genetically selected pigs from the nursery in Holdenville, Oklahoma, that are shipped to contract farms in Iowa for raising. It requires massive feedlots, controlled by contracts, that can guarantee a nonstop supply of cattle. The system also requires the rules that Tyson has imposed. This is what delivers the cheap pork chop, the Zilmax-infused hamburger patty, and the ever-ready supply of chicken McNuggets.
Billions of dollars flow into the industrial meat system each year, helping further entrench the system as the new way of doing business in rural America.
The changes already wrought by this system are seen as irreversible by many in the industry.
There doesn’t seem to be any force powerful enough to stop this transformation. But some people have tried.
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1. This was the original megaplant that was built by IBP in the early 1980s. The IBP plant outside Garden City was one of the first to make wide use of contracts to ensure a captive supply of cattle, a technique that is now standard for Tyson’s competitors.
2. Klein was later promoted to become CEO of National Beef, a title he still held in 2013.
3. Tyson Foods refused to discuss the behavior of its cattle buyers in Dodge City. The company said that it does “bid competitively on cattle we believe meet our requirements for high quality beef.”
4. This was prior to the IBP-Tyson merger.
5. Ward Feed Yard’s contract allows the company to sell its cattle to meatpackers other than Tyson if Ward’s managers are unhappy with the deal they get. But it appears that clause does not get used, and virtually all of the feed yard’s cattle go to Tyson every week.
CHAPTER 10
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The Food Dictatorship
(1994–2006)
U.S. ANTITRUST authorities mostly stood idle over the last forty years, as industrial meat producers like Tyson Foods extinguished open markets, bought up competitors, and replaced a vibrant livestock industry with a centrally controlled system dominated by a handful of meat companies. But that’s not to say there hasn’t been any resistance to the rise of the meat oligarchy.
There have been a few notable fights in which regulators have tried to slow the tide of vertical integration. These efforts show why it is so hard to stem the power of industrial meat producers. But they also show how even a single state regulator, if properly motivated, can foster competition and curb the worst abuses of big meat companies by simply taking action.
The biggest fight of all was waged out of Iowa, the nation’s strongest farm state, the land of cheap corn and soybeans. In the mid-1990s, Iowa Attorney General Tom Miller launched a fight against vertically integrated meat production that ended up encompassing more than a dozen states and went all the way to Washington, D.C., and the halls of Congress.
But the legal and intellectual resistance to vertical integration didn’t start with Tom Miller. Decades before Miller ever filed a legal challenge in Iowa, a small group of intellectuals started to sound warnings about what they saw happening in rural America, as companies like Tyson Foods began signing up farmers under contract. The warnings of these academics were summarily ignored by most experts and the broader public, but, looking back, the alarms seem remarkably prescient. While antitrust regulators in Washington were looking the other way, some people were closely studying the economic and social effects of industrial meat production as it became more powerful.
In the late 1960s, one of those people was a young researcher named Bill Heffernan. As a near-penniless graduate student, Heffernan logged an ungodly number of miles traveling the back roads of Louisiana. Heffernan was driving from chicken farm to chicken farm in the rural backcountry, laying the groundwork for a new research project. It was a study that he undertook in 1969, and it took him only about thiry-one years to complete. In the end, Heffernan and his colleagues produced a body of work that shows exactly why lawmakers should step in to correct a market that is no longer capable of correcting itself.
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Heffernan’s research was based in the rural area of Union Parish in Louisiana, where a booming poultry industry was expanding in the 1960s. Vertically integrated poultry production was still a radical concept back then, and Heffernan wanted to study it. So he undertook an effort that no one else seems to have duplicated. He went door to door, made phone calls, and drove hundreds of miles between farms. He surveyed farmers and documented their income and their debt. Crucially, he followed up with farmers in Union Parish every ten years until the turn of the century, building a dataset that was forty years deep.
But Heffernan did something more than ask about money. He did something most agricultural economists never thought of doing: He asked the farmers how they felt. He asked them, decade after decade, how much they trusted the companies they worked for and how well they were treated. In doing this, Heffernan assembled a picture that most economists missed. He tracked the relationship between the powerful and the powerless.
There was one reason that Heffernan asked these questions, when almost no one else was asking them. It was because he had read an arcane little book with an impenetrable title, called: Individual Freedom and the Economic Organization of Agriculture.
This book was written in 1965 by Harold F. Breimyer, a brilliant government economist who helped draft some of the earliest U.S. farm policies back in the 1930s. By the mid-1960s, Breimyer was starting to get worried about the American food system. For Breimyer, farms were more than just food factories. Like Thomas Jefferson, Breimyer saw farms as a way for families to own businesses and control their financial destiny. He considered the patchwork of independent farms to be the foundation of a democracy wherein people were free in both political and economic terms. By the mid-1960s, that patchwork was being torn apart as companies like Tyson Foods built networks of contract farms in the South.
Breimyer wrestled with questions that few others pondered: If farms became nothing more than food factories, would farmers become modern-era serfs? If the food industry consolidated, would rural economies become servants to big corporations that were funded by Wall Street capital? Would Americans have any say over how their food was produced?
Breimyer ended his book with a warning. He said vertical integration alone wasn’t a problem, but it would become toxic if companies like Tyson were allowed to buy their competitors and gain broad market power. To use the language of an economist: he said the real danger lay in the convergence of vertical and horizontal integration.1 His warning was almost quaint, in retrospect. He predicted that each region of the country might be dominated by an oligarchy of just four or five big poultry companies. Even Breimyer didn’t imagine that just two companies would control almost half the national chicken market between them by 2011.
It would take more than thirty years, but Heffernan was able to document, in his decades-long study of Union Parish, Louisiana, what would happen when Breimyer’s warning came to pass. Union Parish turned out to be a perfect microcosm of the national poultry industry. In 1969 four big poultry companies were doing business there. Two of them were locally owned. The companies competed for farmers, so the growers had a decent chance of si
gning on with a new company if one dropped them. These farmers responded to Heffernan’s questionnaires with a marked enthusiasm about their business. A full 87 percent said the chicken company they did business with was either a good or very good business partner. A full 93 percent said they liked the people they met during work. Just 11 percent said they could find a better job.
Over the next thirty years, a wave of consolidation swept through Union Parish, just as it did in the rest of the country. Local companies went out of business or were bought. By the 1980s and 1990s, only one poultry company did business in Union Parish: ConAgra. By 1999, a company called Randall Foods built a second plant near the parish and gave some farmers a choice between two firms.
Heffernan documented the social and economic corrosion that this consolidation wrought. By 1999, just 47 percent of farmers said the company they did business with was good or very good. Now 40 percent said they could find a better job. Less than half said they would want their children to take over. Just 69 percent were happy with their success at work, down from 91 percent in 1981. Farmers reported that their contract terms got shorter with each passing year. In 1969 the contracts were often good for seven to ten years. By 1999 many of those contracts were extended only on a flock-to-flock basis.
In short, the Union Parish chicken farmers of 1969 sounded a lot like Iowa hog farmers in the 1990s. They gave up some independence to raise animals under contract, but they were generally treated well by the company with which they worked. They felt secure with their ten-year contracts. By 2000, things had changed. The Union Parish farmers sounded more like the Tyson Foods farmers around Waldron, Arkansas. They were frustrated and largely powerless. The difference between these two scenarios didn’t seem to hinge upon economics alone but upon power. The chicken business became more profitable between 1969 and 2000, yet chicken farmers became worse off. It seemed to have more to do with the concentration of power than with the laws of supply and demand.
Perhaps more disturbing was the impact that consolidation had on the broader economy of Union Parish. Agricultural profits rose stratospherically over the decades, yet the county remained wracked by poverty. The money wasn’t staying in the communities that earned it.
Heffernan became a professor of rural sociology at the University of Missouri. And during his career there he gained membership in a very small group of academics who spent their careers studying the concentration of power in agriculture. Heffernan, like many of these thinkers, spent about forty years publishing paper after paper warning about the effects of a rapidly consolidating food industry, and he was mostly ignored. Heffernan would get a little red in the face when people got him talking about the CR4, for example. The CR4 is a metric that shows how much of the marketplace is controlled by the top four companies in an industry. For decades, Heffernan carefully documented the uninterrupted rise of the CR4 in agriculture. When it came to the chicken business, Heffernan didn’t even need the CR4. He could cite the CR2 (or the “CR-Two!” as Heffernan might exclaim in a typical exchange), which had reached nearly 50 percent with the rise of Tyson Foods and Pilgrim’s Pride. But nobody seemed to care. Food was readily available and relatively cheap, and that seemed to be all that mattered.
Heffernan’s forty-year-long study of Union Parish, though never published widely, was a blueprint for the new power structure of industrial meat production. And by the 1990s, many of Heffernan’s and Breimyer’s scariest predictions were coming to pass. Heffernan and Breimyer ultimately remained obscure figures, but as their predictions began to come true across rural America regulators started to notice and farmers started to fight back.
And the battle would be centered in the unlikely state of Iowa.
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The Iowa Capitol Building in Des Moines is a magisterial edifice atop a hill facing downtown. It has broad marble columns and a gleaming dome gilded with 23-karat gold. The architecture reflects the quiet dignity of a state that for generations reaped a steady fortune from its fertile fields, built on the values of hard work and a strong civil society.
Then there’s the Hoover Building next door. It looks like a giant cinder block that was carelessly dropped in the middle of a parking lot, with a few dark windows carved into its side. The architects must have been looking to evoke the spirit of heartless bureaucracy as they traced its harsh right angles and decided its hallways should be painted in drab, institutional beige and its floors lined with linoleum tile.
This is where Eric Tabor reported to work after he was hired at the state’s attorney general’s office in 1995. Tabor was born and raised on an Iowa farm, and he carried himself with the taciturn demeanor common to men who live off the land in isolated towns and measure their words carefully before speaking. Tall and rangy, Tabor kept his bright red hair close-cropped and wore subdued suits to the office. He wasn’t a flamboyant attorney; he had a diligence and work ethic that came from helping his father mind cattle and raise crops. Still new on the job, Tabor walked toward the fortresslike Hoover Building, past the sand-filled cylinders where the state workers took regular smoke breaks, and pushed open the glass doors to walk inside. A series of framed political cartoons hangs along the hallway on the way to the elevators in the Hoover Building, drawn during the 1930s by one of Iowa’s most famous political cartoonists. The pictures were rendered at a time when food politics were still a viscerally contentious issue in American life, particularly in Iowa, where farming provided most of the state’s economic life. One cartoon shows President Herbert Hoover, an Iowa native, with a shotgun. The words “Food Dictatorship” are etched down the barrel of the gun. A weeping farmer is imploring Hoover to shoot the family dog, which is sitting there obliviously happy, with the title “American Habit of Extravagance” written on its furry back. Next to the dog is a dish with food scraps on it, titled: “Food Waste.”
When Hoover was president, the concept of a “food dictatorship” was a contentious issue in the Midwest. The government was debating, and later passed, an unprecedented series of quotas and production guidelines to directly control the agricultural economy. The efforts were seen as a critical bailout to protect middle-class farmers who were still a considerable voting bloc in those days, and who relied on steady market prices to stay in business. The central planning of agriculture didn’t end for nearly sixty years, and the government was still spending billions a year to prop up farms when Tabor took his job at the Iowa attorney general’s office.
Food politics was still an emotional issue in Iowa in the 1990s, but it was dominated by worries over a different kind of dictatorship. Driven in part by government subsidies to big farms, the business of American food production became more consolidated than at any point in history. Just a few giant grain merchant corporations, like Archer Daniels Midland and Cargill, sat in the middle of the U.S. grain trade. The poultry industry was controlled by Tyson and a few of its smaller competitors, while the pork and cattle industries were moving in that direction. The biotechnology company Monsanto was quickly taking control of the seed industry through its patents on genetically modified crops, which were widely planted.
Nobody really seemed to care about this in America. Food was cheap, and that’s all that mattered. But in Iowa, food politics still mattered. Farming was the last anchor of middle-class life throughout much of the state, and the state jealously guarded its food economy after the farm crisis and recession of the 1980s. Factories could close their doors and ship jobs overseas, but farming had to stay where the soil was. And the richest soil in the world was in Iowa. Farming supported more than just farmers. It paid for the schools, police, and Main Street businesses of Iowa’s towns.
Tabor knew as well as anyone what farming meant to Iowans. Farm income had put him through college at the state university and paid for him to study law at Harvard. He returned from Harvard Law to help his father run the family’s cattle operation, and eventually he earned his law degree from the University of Iowa. Farming wasn’t just a way to raise food, in
Tabor’s eyes, but a way to keep money flowing to the middle class and to rural America.
It was only fitting that Tom Miller, Iowa’s attorney general, hired Tabor to oversee the office’s farm division. In Iowa, this was the equivalent of regulating Wall Street. Tabor would be one of the top regulators overseeing massive companies that now dominated the farm economy. When Tabor was still new on the job, Attorney General Miller told him he should look into a curious new practice that was becoming more common in Iowa: contract farming.
In 1980, only about 2 percent of Iowa’s hogs were raised under contract. The rest were raised by independent farmers who sold their animals on an open cash market to the highest bidder. In 1995, the share of hogs grown under contract had grown tenfold, to 20 percent. By 1998 it would double again to 40 percent, and by 2011 well over 70 percent of all hogs would be raised under contract. But even in 1995, 20 percent of hogs being raised under contract seemed a breathtakingly high percentage to regulators and farmers in the state. More companies each month were entering the state and offering contract arrangements to farmers, promising steady income and less risk if they gave up their independence.
Bad stories were starting to spread from farm to farm about contract farming. Out-of-state companies often wrote agreements in complex language, with loopholes that left farmers powerless and shifted most of the farm profits to the companies. Miller explained that these contracts were apparently becoming common to raise turkeys, chickens, and even hogs.
The Meat Racket: The Secret Takeover of America's Food Business Page 25