The Meat Racket: The Secret Takeover of America's Food Business

by Christopher Leonard

  Then, on December 14, Tyson sent Boonau another terse letter. He hadn’t met the company’s criteria for getting off the management program. He was also provided a series of documents that portrayed the economic performance of his farm with a level of breathtaking detail that Boonau, the farm’s owner, would never have been able to ascertain on his own.

  There were graphs that charted the growth rate of chickens on his farm going back to 2006, comparing it to the average rate for farmers in the Waldron complex. The spiky line of Boonau’s growth rate fluctuated wildly from flock to flock but always seemed to come in below the average. Another bar graph showed his farm’s average cost to produce a pound of meat, compared to the average around Waldron, going back to 2006. Boonau did better than the average on only five out of twenty-one flocks.

  Boonau read over these documents as he sat in the kitchen of his small farmhouse south of Waldron, wearing a green baseball cap and rubber boots. His English was proficient, but he still had a hard time truly comprehending what the letters told him. Tyson seemed to have measured every ounce of feed and every chicken that had passed through his operation and had deemed his farm wasn’t worth their time or money.

  But Boonau shouldn’t have taken it personally. His failure exemplified one of the most important elements of Tyson’s tournament. The system does more than simply push risk onto the farmer. It also allows Tyson to control the one element of meat production that is owned by the farmer: the physical infrastructure of the farm. With each flock being a risky, life-or-death competition against neighbors, farmers turn to the one thing they can do to boost their efficiency. They spend more on equipment, hoping it will boost their efficiency just a little, whether it’s profitable in the long run or not.

  It’s true that a farmer’s ranking can be almost random within a tournament, given that he has no control over his birds or feed. But there is one clear trend within the competition. The bigger, newer houses tend to rank above the smaller, older houses when they compete against one another. The correlation isn’t perfect, but, overall, farmers with newer houses do better than the farmers with older houses.5

  C. Robert Taylor, the Auburn economist, has seen the trend clearly in the data he reviewed. What this means, over time, is that the tournament acts like a kind of anti-Robin Hood, taking money from farmers with older houses and using it to subsidize construction of newer houses that compete against them. Big, wind-tunnel houses like those at N&N Farm steadily take pay from the older houses like Richard Moore’s. So the farmers who have been with Tyson the longest end up paying for newer farmers to borrow more money and build new houses. The deductions come out of their paycheck, thanks to the tournament, and the money flows to the newer housing. The competition isn’t just between immigrant farmers and local farmers. It is between older farms and newer farms, and whoever happens to occupy them.

  * * *

  On Valentine’s Day, 2010, only the children were home at N&N Farm. It was a Sunday, and none of the kids knew where their parents, Nouk and Nue, had gotten off to. The Yangs’ twenty-one-year-old son, Tua, was watching the house, home for a weekend visit from college in nearby Fort Smith. That morning he babysat his twelve-year-old brother and ten-year-old sister.

  The kids were excited. There was a Valentine’s party planned that day at the Laotian church downtown, and the next day was President’s Day, so they had the Monday off from school. But Tua dutifully reminded his siblings there were chores to be done before they could head to the party.

  Tua’s ten-year-old sister donned a puffy purple coat and pulled big rubber boots over her pajama pants emblazoned with white clouds and yellow stars.6 Tua put on a hooded sweatshirt while his twelve-year-old brother grabbed a windbreaker and his favorite baseball hat with a Baltimore Ravens logo on the front. They went outside, where gray clouds had rolled in over the mountains and brought with them a biting, cold wind. Tua and his siblings each grabbed a white plastic bucket, then headed up the gravel road toward the chicken houses.

  Tua opened the door of the first house and they all went inside. It was dim and warm, an enormous cavern where the air was hazy with ammonia that burned the throat. Chickens clucked and warbled, and the two young kids walked away from Tua and down toward the end of the houses. Their path was lit by big heating lamps that hung at regular intervals from the ceiling, clicking on automatically with a hiss and exuding orange flames.

  The kids collected dead birds. As they walked through the flock, the birds dispersed in a broad arc, revealing little pale carcasses stuck in the chicken litter. The kids picked them up and tossed them in the bucket.

  Only Tua was old enough to be worried about how many dead birds they found that morning. His parents had told him there was something terribly wrong with this flock, though they didn’t know what. Ever since the Tyson trucks delivered the birds in January, the animals had been dying in waves. The Tyson trucks had delivered 39,000 chickens to each of the Yangs’ seven houses. In the first week on the farm, it would have been normal for about 390 birds to die in each house. Instead, Nouk and Nue hauled out more than 2,000 birds from each building. By the end of the second week, they had taken between 2,000 and 5,000 dead birds from each house.

  After working for a while, Tua’s sister set down her bucket, which was overfilled with dead birds and too heavy for her to carry. Tua walked over and helped her lug it out of the house.

  “Man, so many,” Tua muttered. He flipped the bucket upside down and dumped its contents into a beige plastic freezer. Although Tua didn’t know Jerry Yandell, he was discovering that the fundamental rules of chicken farming hadn’t changed that much since Yandell’s day. In spite of all the high-tech equipment at N&N Farm, the Yangs were still vulnerable to the same factors that drove the Yandells out of business. The Yangs never owned the birds they raised and couldn’t control the quality of the feed Tyson delivered.

  Tua stood outside and tallied the dead as the kids left each house. He is a slight man, wearing oval-shaped eyeglasses that would easily let him pass for a teenager. But his face bore the wrinkles of a very worried grown-up that morning as he squinted at the worksheet and counted the dead birds from the flock.

  Tua knew what the mortality rate meant for the farm and his parents’ future. By the end of two weeks they had lost about 27,000 birds, or 10 percent of the flock. That took about $15,000 out of their paycheck, while the mortgage payment stayed the same and the heating bill climbed because of the propane they pumped into the houses.

  The Yangs had no idea what kind of disease was burning through the birds. Nouk called the family’s Tyson field technician and told her what was happening. She visited the farm while he was not there and left a note. The field technician speculated that the birds might have some sort of respiratory problem, something that could have originated in the hatchery.

  Nouk tried to keep the birds alive, but there were only so many levers he could pull to alter the environment inside the chicken houses. He ran the fans faster, then slowed them down. He pumped up the heat, then cooled it off. But the birds kept dying, hundreds a day.

  Tua and his siblings went through the houses, came out, and dumped the carcasses into plastic freezers that were brimmed full with dead birds. At one point when they came out of a house, they saw it had started snowing, with thick white flakes swirling down from the clouds, sticking on the tops of the aluminum feed bins and melting on the wet orange clay ground between the houses.

  The kids tilted their heads back and caught snowflakes on their tongues.

  “Hey!” Tua’s little brother said, smiling. “It’s snowing! I told you I could see the future!”

  * * *

  By the time N&N Farm got up and running, Jerry and Kanita Yandell were well ensconced in their new life. The couple lived in a small trailer off Highway 80, not far from their old place. Jerry worked on the county road crew, Kanita worked at a nursing home. Both earned low wages and couldn’t afford to buy a home, but Jerry considered it a step up from t
he chicken business.

  After a long day of hot work along the asphalt highways, Jerry stood on the couple’s small wooden porch, where morning glory vines crawled over a rickety wooden trellis and provided him shade. He didn’t like to think about Tyson or farming much at all now that he had moved on. But he couldn’t help but be curious about the new tide of Laotian farmers moving into the area. When he heard that Nouk and Nue Yang had borrowed $2 million to build the complex of seven houses nearby, Yandell took a long, contemplative drag from his cigarette.

  “They’re doomed,” he said.

  * * *

  Nouk Yang spent his long weekend days alone on N&N farm. One Saturday in February, his wife, Nue, left town to go to a church event in Oklahoma with the kids. But with the birds still dying off at a rapid pace from some unknown disease, someone had to stay behind to monitor the flock. So Nouk stayed home. But beyond checking on the birds, there was little he could do to stave off their sickness. With nothing but time on his hands, Nouk took a BB gun and walked over a hill to a small lake on his land, where he shot glass bottles placed on fence posts. Nouk had one attribute that made him a particularly gifted chicken farmer: He knew how to wait. He had spent much of his youth in refugee camps in Thailand, waiting for each meal, waiting to find out when he would get a ticket to the United States.

  Waldron was Nouk’s better life. And he was able to embrace it because of a second quality that made him a great chicken farmer: his deep sense of fatalism. Nouk believed destiny smiled on some and scorned others. It wasn’t up to people to decide their fate. He, for example, wondered how anyone was able to get a job that entailed sitting in an office all day, enjoying air-conditioning and wearing nice clothing. Work for him entailed wearing a facemask, breathing rank ammonia, lifting white buckets full of dead chickens. He worked a seven-day-a-week schedule. The air of the chicken houses infected his clothes. He knew it must be unhealthy to breathe it, and for his children to breathe it. But what was he to do?

  Nouk sat on a concrete slab next to one of his big chicken houses that sunny Saturday afternoon in February, while the birds died inside, and pondered things. On paper, he was a rich farmer. He owned property worth nearly $2 million, with seven massive chicken houses and a white propane silo installed next to them. More than $300,000 in cash passed through his hands every year. But for all that money, Nouk couldn’t afford to repair the long gravel driveway that ran from the road up to his chicken houses, which was getting rutted by Tyson’s trucks. He had less than $10,000 in the bank account, a fraction of what he would need to cover his bills if he lost money on this flock. He and Nue avoided doctors because they could not afford health insurance.

  Nouk seemed resigned to this. Almost comfortable with it.

  “When I lived in Laos, I never had health insurance. You know, if you’re going to die, you’re going to die,” he mused.

  His destiny was out of his hands. He was stuck between Tyson, which gave him his income, and the banks, which demanded his mortgage payments. He had learned from other Laotians that the banks wouldn’t blink before foreclosing on him if he didn’t make his payments.

  In the end, Nouk and Nue Yang were lucky. Because their farm was virtually brand new, they were able to drop their contract with Tyson Foods and get picked up by its competitor, OK Foods out of Fort Smith, Arkansas. Most farmers don’t have this choice. Chicken companies usually demand massive new investments in a farmer’s chicken houses if the farmer wants to switch companies. For people like Doug Elmore or Jerry Yandell, the extra cost is prohibitive. Switching is made more difficult by the paucity of choices—many farmers live close enough to only one chicken company with which they can do business. After the Valentine’s Day weekend when Tyson’s birds died off in huge numbers, Nouk and Nue were ready to make a change, and OK Foods accepted their bid.

  Nouk Yang discovered that the chicken business was almost unchanged under OK Foods. He was still paid through a tournament system, and he still had no control over the health of his birds or the quality of his feed. His financial picture didn’t change at all after making the switch. Plenty of money still flowed through the farm, but the Yangs kept very little of it.

  * * *

  On a hilltop south of Waldron, an old farmhouse has been painted in wild tropical colors, with burgundy walls and a vivid tableau above the front door showing Buddha, meditating serenely with a mountain range behind him, surrounded by loyal supplicants. A hand-painted sign nearby identifies the building as “Wat Lao Sirithummo of Waldron,” the Buddhist temple where local Laotians gather to pray.

  Inside, Laotian chicken farmers gathered around a broad table one Saturday night for a community meeting. A Buddhist monk sat at the head of the table, dressed in a bright orange robe. Boonau Phouthavong was next to him, sitting upright with the quiet dignity of a village elder. As one of the earliest Laotian settlers in Arkansas, Boonau was considered a dignitary of sorts, having helped many of his fellow immigrants get acclimated to the area when they first arrived. He didn’t speak often during meetings, but when he did his words carried weight.

  In the winter of 2010, the Laotian community was beset by bankruptcy and farm failures. People were coming to Boonau for help and advice. Many farms had gone under within just one or two years of being bought. The Laotians were amazed at the economics of chicken farming, once they finalized their loans and started accepting chickens from Tyson or OK Foods. Their checks barely covered the cost of propane and electricity needed to raise a flock of birds. When they ranked poorly in the tournament, they actually lost money for their labor. Tyson’s field technicians seemed unable or unwilling to help them. One after another, farmers in Arkansas, Oklahoma, Missouri, and elsewhere simply gave up. In some cases they walked off the farm, leaving behind their life savings.

  With his own farm on the edge of failure, Boonau was at a loss to help. After sending him the letter on December 14, Tyson refused to deliver any more birds to his chicken houses. He had just signed a contract with the company on October 26, 2009, that was supposed to supply him birds through October 2012. But it didn’t seem to matter. All five of his chicken houses sat empty. One of the houses had collapsed because of an ice storm, and he didn’t have the money to repair it. Boonau sold off cattle he grazed near his chicken houses to keep up with the electricity and other utility bills.

  * * *

  After a long Saturday morning of work in 2011, Boonau Phouthavong sat on the front porch of his small trailer home, overlooking a rolling green meadow and the hulking, silver-roofed chicken houses in a neat row. Out beyond the chicken houses, the tree-covered mountains made a jagged wall. The air was clean, and a cool breeze blew through the valley. In this quiet moment, with the stillness and greenery all around him, Boonau seemed to be living the life of a real farmer. He looked content.

  Tyson had withheld delivery of its birds for about a year. Boonau begged and cajoled, but it made no difference. The bank agreed to delay part of his loan payments, so he didn’t have to declare bankruptcy. Then in the spring of 2011, Tyson called out of the blue and asked him if he’d be willing to accept a load of chickens. He said he would. The company only agreed to deliver birds to his farm west of town, where he sat on his porch. The other farm sat empty, but he still paid the mortgage on it. In spite of that, he was able to keep afloat as long as Tyson delivered birds, so he accepted the work.

  Tyson seemed to have found the ideal farmer in Boonau Phouthavong. The company held complete power over his destiny, and Boonau had come to peace with that fact. It was not as bad as the Communists. Not as bad as Laos.

  Boonau didn’t question whether Tyson was a good or bad business partner. Good and bad weren’t his concern. What was important to him was that Boonau understood Tyson. He knew how to work with it. In Boonau’s eyes, Tyson’s business was not unlike a feudal monarchy. Its employees had the arbitrary power of medieval lords, a power they so willingly displayed when they shut him down for nearly a year. And these new-age barons were
all part of a closed society, in Boonau’s estimation. Tyson hired its own managers and gave them control of the farms regardless of what any outsiders thought. Skill and knowledge had nothing to do with their power. Often these men didn’t seem to have the foggiest idea how to run Boonau’s farm, but still they told him what to do. And, being a quick student, Boonau had learned how to cope with this. He simply stayed quiet. He didn’t talk back. He didn’t ask questions. He didn’t threaten to sue when the company said it would shut him down. He accommodated Tyson, and he survived.

  It might seem curious that a bank would be willing to lend $2 million to a couple like the Yangs, or hundreds of thousands of dollars to a farmer like Boonau. The Laotian immigrants are living on the ragged edge of bankruptcy even though some operate monstrous, state-of-the-art farm complexes. The high failure rate among farmers is well known. But the banks keep lending easy money for farms, so new operations can replace old ones when Tyson’s tournament drives farmers out of business. The reason for this is simple: The banks have a very powerful patron to bail them out if the farm loans go bad: the U.S. taxpayer.

  * * *

  The tournament system is kept afloat by an obscure federal organization called the Farm Service Agency. The FSA spends hundreds of millions of dollars in taxpayer money to make sure that there will always be cheap loans for a new chicken farm when an older one is put out of business.

  Ron Burnett is a loan officer in Arkansas who has seen how the farm loan program works firsthand and how it has changed over the last few decades. In 1983 Burnett became a loan officer for a small division of the U.S. Department of Agriculture called the Farmers Home Administration. Few people ever heard of the agency, whose nominal goal was to ensure that struggling farmers had access to credit. But from his vantage point in the Arkansas branch of the agency, Burnett watched as it grew and ultimately made taxpayers responsible for billions of dollars in loans for industrial chicken farms.