The figure “AFC” represents the weighted-average cost of all the flocks in the tournament, and that’s the benchmark used for the ranking. Farmers aren’t ranked against some sort of industry average cost, or even the average cost of growing chickens in their area. They are ranked against each other. That means that no matter how well they do, about half the farmers will end up taking money from the other half. Even if a group of farmers does extremely well during a given week—if they all happen to raise chickens at a remarkably efficient rate and use way less food to grow a bird than the typical farmer—they won’t all get a big bonus payment for their work. Under Tyson’s system, half of them still end up losers. The average cost of production for that remarkable week of growing becomes the benchmark against which the farmers are ranked. The top performers, even if the margin is slim, take payment from the bottom.
This incentivizes farmers to fight one another economically, rather than focus strictly on good performance. Each farmer knows his survival is dependent on his neighbor’s loss. And his neighbor’s gain comes at his expense. This leaves the farmer desperately seeking to get any edge he can to push his neighbor into bankruptcy.
The equation also spells out a critical function of the tournament. It helps push the financial risks of farming from Tyson to its farmers. The tournament allows Tyson to set a base price, letting it predict how much it will pay for chickens, even as pay fluctuates for the farmer. That’s because Tyson shifts the base pay around for its farmers, but only by shifting pay from one to another. A simple breakdown shows how this works. The best farmer makes six cents a pound, but he takes that money from the bottom farmer, who makes four cents a pound.
FARMER
RANKING
BASE PAY
TYSON’S AVERAGE COST
Farmer #1
1
6 cents
5 cents
Farmer #2
2
5 cents
5 cents
Farmer #3
3
4 cents
5 cents
The tournament, then, lets Tyson predict exactly what it will pay for chickens while making the farmer’s income wildly volatile. Who wins and who loses doesn’t change anything for Tyson Foods. The farmers are left to fight that out on their own and determine who gets to stay in business.
* * *
Boonau Phouthavong’s background made him an ideal chicken farmer. He knew how to endure, and he knew how to sacrifice. His personal definition of hardship entailed sleeping in the jungle, scrounging for food, and being hunted like an animal by government soldiers. Chicken farming wasn’t so bad by comparison.
After buying Edwin’s chicken houses, Boonau enjoyed his most profitable run of years as a chicken farmer. He invested roughly $60,000 into the houses, adding computer systems that automatically controlled the climate and new fans that cooled the birds in a wind tunnel. He and his wife, Pat, lived in a mobile home nearby three of their chicken houses, sharing the small quarters with their two children.
Boonau took to chicken farming with relish, donning his white facemask and entering the cavernous industrial barns to work every morning with the happy resolve of a man who had finally found his good station in life. Pat had to work at the Tyson plant in town to make ends meet, but the sacrifices the couple had to make seemed tiny compared to those in their past.
When he was sixteen, Boonau was drafted into the army, during a time when the United States dropped more bombs on Laos than it deployed during the entirety of World War II. But even Boonau’s time in the army was easier than what came afterward, when his country fell to a Communist regime in 1975. Boonau hated the new centralized government and the fact that his family no longer owned their land, or even their harvest of rice. Communist bosses decided how much money Boonau’s family could keep from their labor, and their decisions seemed arbitrary and corrupt. When he was in his early twenties, Boonau fled to the jungle and joined a ragtag band of resistance fighters. He split his time between the jungle and a refugee camp in Thailand.
Boonau eventually emigrated to the United States, pressured by his parents, who didn’t want to see him killed in combat. He arrived in the Midwest with nothing and got a factory job in Chicago.
By the mid-1980s, Boonau was working as a factory machinist and living in a small apartment. He had a few weeks of job training and spoke enough broken English to get him through a trip to the grocery store or a restaurant. Even then, Boonau dreamed of owning his own land and a house and setting money aside for retirement. He wanted the kind of economic independence his parents and grandparents enjoyed as property owners in Laos.
A relative told him about the business of contract chicken farming. It was hard, smelly work, but there was stability to it, a steady paycheck. There was good money in it, Boonau heard. And independence. This job, above all the others, captured his imagination. He would live in the green countryside, on land he owned. There was no job more self-sufficient than being an American farmer.
Starting in 1985, Boonau worked in the factory every day and dreamed of the farm he would own, the house where he would live on some wooded hillside somewhere. He married a fellow Laotian refugee named Pat, and they had two children.
Boonau and Pat Phouthavong saved everything they could, which turned out to be quite a lot. If there is ever an Olympic event in saving cash from a meager paycheck, there is no question Laotians would dominate the sport. Members of the Laotian diaspora opened McDonald’s franchises, hardware stores, and restaurants in the decades after they arrived in the United States, all with money they somehow saved away while living near the edge of poverty. The Phouthavongs were no different. They lived with the kind of frugality only practiced by people whose early life was steeped in deprivation.
Fifteen years later they had amassed roughly $70,000 between them, and they owned a house worth near $80,000. In 1999 they used their life savings as a down payment on a better life, buying their first farm outside Waldron and signing their first contract with Tyson Foods.
Local farmers were quietly puzzled as to why someone like Boonau would sink their fortunes into chicken farms that barely turned a profit. But he himself felt comfortable with the investment. Tyson was good to him. The company paid Boonau a Christmas bonus, and it was quick to answer his calls when he needed help. Boonau ranked well in the tournament system and was turning a steady profit off each of his houses. Like Jerry Yandell in the late 1990s, Boonau was a man who did well by the chicken business.
But because of the way the tournament system was structured, his success came at his neighbors’ expense.
* * *
Greg and Donna Owens had done well in Tyson’s tournament system for nearly a decade, placing at the top sometimes, or more commonly toward the middle. Then some invisible hand seemed to grab hold of their operation, dragging them lower in the competition. They started placing last and couldn’t seem to break the average mark. And for the life of her, Donna couldn’t figure out why.
It didn’t seem to be a problem with the farm. The Owenses ran a small place, two chicken houses off a winding gravel lane called Lick Skillet Road. They bought the place in 1998 from Jerry Yandell, who was Donna Owens’s distant in-law. Yandell was looking to unload some of his property to scale back. The Lick Skillet farm was a profitable one, he assured them.
The Owenses couldn’t really afford the place, but Donna’s parents agreed to cosign a loan with them for $114,000 to finance the purchase, putting up their own 120-acre farm as collateral. For Donna Owens, it was the down payment on a dream life. She had worked at the Tyson plant since high school, and by the late 1990s she was having back trouble from standing all day on the concrete floor of the slaughterhouse. The couple’s new farm was a fresh start, a dignified way to make a living and a chance for the Owenses to set their own schedule.
For years, the farm paid off well. The Owenses afforded a modest life, with occasional meals out in Waldron and new clothes for thei
r son and daughter. Donna’s husband, Greg, was no stranger to hard work. Looking like a figure who stepped right out of a Civil War photo, he didn’t bother to shower or shave when entering the modern world. He’s as tall as a bear, and he has a thick matted beard. Greg wears grimy denim overalls around the farm, and he has a habit of notching his thumbs into the overall straps and pushing outward when he speaks, puffing out his chest. Greg’s hands hang like big stones at the ends of his arms, and it would seem unwise to provoke him into swinging them.
For all of his size and apparent strength, Greg would wince and slouch his shoulders like a schoolboy at the mention of Gary Roper’s name. Roper, the manager at Tyson’s complex who oversaw the Owenses’ farm, was in increasing contact with the couple throughout the winter of 2007 and spring of 2008. Donna was calling him and pestering her field man, trying to figure out why the couple couldn’t place better in the rankings. The Owenses’ field man simply criticized everything they did in response. After a decade in the business, it seemed as if they had forgotten the rudimentary elements of raising chickens. They were told to run the fans longer, work on their water lines, make more passes through the house to collect dead birds. None of it helped. They sank lower in the rankings, their paychecks shrank, and eventually Tyson sent them a letter saying they’d been placed under Intensified Management Status. Under this program, farmers get three final chances, three flocks with which they must beat average cost to get released from the program and keep their farm. If two out of three consecutive flocks are below the average, and a certain measurement of their birds’ weight is in the bottom 10 percent for farmers in their network, Tyson can cancel their contract.
The Owenses didn’t make it. Greg Owens drove to the complex to meet with Gary Roper and ask him how Tyson could cancel their contract after so many years in the business. In response, Roper used a dog-racing metaphor he apparently thought Owens could easily understand.
— If you were running a dog race, and you were getting outrun all the time, then there wouldn’t be much use in you being in it, Roper told him.4
Owens understood he was the dog who wasn’t winning the race, the dog that wasn’t making Tyson enough money.
Roper offered Owens a way out. Owens could take out a loan for hundreds of thousands of dollars and update his chicken houses, adding new fans and walls and insulation to make them more efficient. It would indebt the Owens family for years, another decade at least, at a time when their current mortgage was already eating most of their paycheck from Tyson.
— I can’t do it, Greg said. So you’re just going to cut me off? Just cancel my contract?
A letter from Tyson made it official. Their contract was canceled. The farm on Lick Skillet road was out of business. Months later, Donna Owens was still trying to figure out what had happened and puzzle out what had driven them down in the rankings so quickly.
* * *
The tournament system isn’t built to produce enduring winners. This fact became evident to Boonau Phouthavong around 2008. By that time Boonau should have been at the pinnacle of his career as a chicken farmer. He was nearly a decade into the business and had plenty of experience that taught him the tricks and techniques of industrial animal production. He was a veteran, and he’d spent years paying down the loans on his chicken houses, giving him the first glimpse of the profits that come from operating a chicken farm that was free and clear of debt. He had sold the two chicken houses he bought off Edwin at a tidy profit and was able to plow the money back into the other five houses he operated.
But in spite of all he had going for him, Boonau noticed that his paychecks were steadily declining. He seemed to be ranking lower and lower in the tournament system and couldn’t seem to pull above average no matter what he tried. His houses might be considered slightly out of date, at least compared to the brand-new operations being built around him, but they were hardly obsolete. They weren’t even halfway through the thirty-year lifespan of loan taken out to build them. On paper, the farms Boonau operated should have had decades left of good production.
To understand why he was losing money, Boonau only needed to take a short drive down the country roads east of Waldron. There he would have seen the reason for his troubles. There was a freshly cut gravel driveway leading off the side of the road, and next to that a metallic sign advertising one of Tyson Foods’ newest farms. The sign simply said: N&N Farm.
* * *
The chicken houses on N&N Farm command the high ground and are lined up in a neat row like the barracks of an occupying empire. The houses have locked steel doors and no windows. At each end of the houses are two wide-mouthed fans as big around as swimming pools, thrumming and sucking air inside to make a wind tunnel that cools the flocks.
There is a small green farmhouse at the bottom of the hill, and very early one October morning the glass door on its back porch slid open and out stepped Nue Yang. Nue is a slight woman, and she stepped gingerly past a pile of shoes her kids left by the door in the Laotian tradition. She walked down the sidewalk and toward the yard, where her husband, Nouk, was already outside, wiping dew off the windshield of an all-terrain vehicle. Nouk was working quietly, wearing a kelly-green hat emblazoned with the yellow script: “Nothing Works like a Deere.”
Nouk and Nue (hence the name N&N farm) were new to Waldron. Their farm was only a few months old, and the gravel drive leading up to the houses was newly cut into the ground. Nue got into the ATV Nouk was cleaning and started driving up the hill, toward the chicken houses. There was a white bucket in the seat behind her that she used to collect dead chickens as part of her morning routine.
Jerry Yandell wouldn’t recognize the farm Nouk and Nue operate. The couple had borrowed nearly two million dollars to build the complex. Each chicken house has a small control room with a computer inside that controls a system of thermometers, feed-bin monitors, and water-level gauges, constantly monitoring the environment inside, where more than twenty-five thousand birds eat and grow. Because the houses are so big, with so many animals crammed inside, the birds can start dying within fifteen minutes if anything goes wrong. So the computers in each house are wired to a pair of cell phones Nouk and Nue carry at all times. If a water line clogs or a fan quits running, even for a short time, the computers call Nouk and Nue. Some nights, the cell phones are like fussy infants, squalling every forty minutes, reporting everything from tiny glitches in the fan system to water pipe failures that require an immediate trip up the hill.
The Yangs’ most recent batch of nineteen-day-old chickens had been relatively easy. Nue stopped the ATV outside and grabbed the white bucket before walking into a small plywood shack adjoining the first chicken house. Inside, she looked at the white computer monitor on the wall and entered a pass code. Several screens popped to life with digital readouts. The temperature was 78.5 degrees, while the thermostat was set at 76.6 degrees. Not a worrisome spread. The fans were temporarily off, and the feed lines were steadily piping food to a network of trays inside the house.
Nue opened a small door, slid a white facemask over her mouth, and walked inside the barn. A clucking echoed up from the sea of birds as she walked through the flock. She passed slowly down the length of the barn, past round heating globes that hung at regular intervals from the ceiling. Nue looked down as she walked, scanning from left to right. She spotted dead birds, half buried in the litter, and bobbed down quickly to grab them, throwing them into the bucket in her hand.
Plunk, plunk, plunk, she threw them in the bucket. She walked the length of a Wal-Mart parking lot to the end of the barn, then turned around to come back along the opposite wall, collecting dead birds along the way.
Back outside, Nue opened a plastic freezer and dumped the dead birds inside. The chicken houses behind her looked imposing, the exhaust fans protruding from them impossibly huge. A farmer with older chicken houses could look upon the buildings and know they were outgunned. The automatic ventilation, the airtight insulation, and the computer-controlled
feeding systems shaved precious pennies off the cost of raising each chicken. And because of the way the tournament system was structured, those pennies would be taken away from any farmer unlucky enough to be pitted against N&N Farm.
* * *
In 2009 Boonau Phouthavong discovered he was a failure as a chicken farmer. Tyson laid out the extent and scope of his shortcomings in a series of detailed letters the company sent Boonau throughout 2009. At first, his failings had been made clear by his low rankings in Tyson’s tournament, which never seemed to improve. Because he ranked below the average for three flocks in a row, Boonau had been put on Intensified Management Status, and given a Performance Improvement Program. He was told that if he did worse than the average on any two out of three consecutive flocks, and if a six-flock average of his birds’ weight was in the bottom 10 percent for farmers at the Waldron complex, Tyson could cut off his contract.
On May 19 Tyson sent Boonau a letter outlining the nature of his improvement program. The message was brief:
“Basic management practices are an important part of getting good performance out of the birds. Areas that need to be carefully controlled are: Consistent brooding, correct water and feed line height, temperature control, house ventilation, and feed management, such as keeping the lines at the proper height and depth so the birds do not waste feed. You must constantly strive to manage the birds and equipment on a daily basis to get maximum performance and be competitive.”
In essence, the letter only said: “Be a good farmer. Work hard.” There weren’t recommendations for new equipment he could buy to upgrade his houses, or substantial changes he could make to improve. Tyson’s letter made clear the company could put him out of business if he didn’t improve his performance, but Boonau couldn’t figure out what to do differently. He tended the birds daily and made sure the water and feed lines were clear. But still, he kept sinking lower in the tournament rankings.
The Meat Racket: The Secret Takeover of America's Food Business Page 14
